2 min read
Definition
Zero-based budgeting requires each budget line to be justified from a base of zero every period, rather than starting from last period’s figures and adjusting. Every cost must earn its place.
In plain terms
Instead of "last year plus 3%", you ask "do we need this at all, and how much?" for everything. It is more effort but exposes spending that has quietly become habit.
Why it matters for your company
ZBB is a strong tool when margins are tight or costs have crept up, forcing a clean-sheet look at spending. Pair it with variance analysis to hold the line. See contribution margin.
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