Zero based budgeting: What is zero-based budgeting

What is zero-based budgeting? ZBB is a budgeting process where, on a very granular level, you go through a company’s spending and determine what resources various business units require. That means looking at individual cost categories across all business units. Zero-based budgeting is a method of budgeting that starts each department's budget at "zero"and requires each line of a business's expenses to be justified. This budgeting method stands in contrast with traditional budgeting, which relies on past budgets and only justifies changes to historical budgets. The term "zero-based budgeting" originated from Peter Pyrrh's 1970s book, Zero Based Budgeting: A Practical Management Tool for Evaluating Expenses, however the term has taken on a new ... In this article, we will explore the concept of zero based budgeting, its benefits, implementation process as well as some real-world examples. Zero-based budgeting is an approach where you account for every dollar earned and earmark it for a specific purpose. Also known as a zero-sum budget, it is designed to leave no money to float in your bank account monthly.