Zero Based Budgeting

Learning Objectives

• To gain a working knowledge of Zero Based Budgeting.
• To discuss the history and merits of Zero Based Budgeting.
• To weigh the reward with the risk.
• To determine a framework for implementation.

Course Description

Zero-based budgeting (ZBB) is a method of budgeting in which all expenses must be justified for each new period. It provides a magnificent alternative that can strip or right-size expenditures that have no plausible justification for continued existence as the process of zero-based budgeting starts from a "zero base," and every function within an organization is analyzed for its needs and costs. The budgets are then built around what is needed for the upcoming period, regardless of whether each budget is higher or lower than the previous one.

Traditional budgeting calls for incremental increases over previous budgets, such as a 2% increase in spending, as opposed to a justification of both old and new expenses, as called for with zero-based budgeting.

Traditional budgeting also only analyzes new expenditures, while ZBB starts from zero and calls for a justification of old, recurring expenses in addition to new expenditures. Zero-based budgeting aims to put the onus on managers to justify expenses and aims to drive value for an organization by optimizing costs and not just revenue.

In this CPE Finance Webinar we will explore practical aspects of Zero Based Budgeting and will cover the following key topics:

• What is Zero Base Budgeting
• Steps in Zero Base Budgeting
• Case Study to understand practical implications

This CPE webinar explores, discusses, and provides a budgeting solution framework that helps organizations explore Zero-Based Budgeting (ZBB) as a technique when they develop their Annual Financial Plan. There is a saying that states, “Give every dollar a job.” Said another way, every dollar should seek to contribute to the highest possible, risk-adjusted, organizational ROI.

Overview

• Defining ZBB (Zero based budgeting)

  2 mins
• Reason why ZBB is used

  11 mins
• Key difference with traditional budget process

  23 mins
• Advantages of ZBB

  32 mins
• Most common use of ZBB

  42 mins
• Transition from traditional budget to ZBB

  57 mins