Zero-Based Budgeting Zero-based budgeting is an approach to planning and decision making which reverse the working process of traditional budgeting. In traditional incremental budgeting, departmental mangers justify only variances versus past years, based on the assumption that the “baseline” is automatically approved. By contrast, in zero-based budgeting, every line item of the budget must be approved, rather than only changes. During the review process, no reference is made to the previous level of expenditure. Zero-based budgeting requires the budget request be re-evaluated thoroughly, starting from the zero-base. This process is independent on whether the total budget or specific line item are increasing or decreasing. The term “zero-based budgeting” is sometimes used in personal finance to describe “zero-sum budgeting”, the practice of budgeting every dollar of income received, and then adjusting some part of the budget downward for every other part that needs to be adjusted upward. Zero-based budgeting also refers to the identification of a task and then funding resources to complete the task independent of current resourcing.
Posted on: Mon, 23 Sep 2013 05:03:29 +0000
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