Some companies have developed centralized repositories of finance data that allow for transparency in budgeting discussions. To sum up, although zero-based budgeting is an option that can create numerous benefits, there are also some potential drawbacks. Whilst we make reasonable efforts to keep the information on this page up to date, we do not guarantee or warrant (implied or otherwise) that it is current, accurate or complete. In many aspects, the "common misunderstanding" of ZBB resembles a "sunset review" process more than a traditional public sector ZBB process. Carlos Brito, a protégé of Jorge Paulo Lemann, "brought to Anheuser-Busch the concept of zero-based budgeting" at Anheuser-Busch InBev as early as in the 1990s.

Certain political officials could say they greatly support a certain program and would like the Finance Department to focus more money on that particular program whilst other political officials would think otherwise. Zero-based budgeting (ZBB) is a budgeting technique that allocates funding based on efficiency and necessity rather than budget history. Unless the 0's now represent time or are code from something else non-numerical, they've lost their meaning.The time and training required for zero-based budgeting may mean managerial staff do not react to sudden changes to their operations, such as shifting markets or a departmental emergency.

Rather than assume that funding levels should remain the same, the CCO asks the budget owners from the business units, “Why is this the case, and does it need to be this way? Companies should focus on gaining visibility into where resources are allocated throughout the organization, determining staffing levels, and assessing role definitions.

Federal law affects environmental program spending, and both state and federal courts help determine state spending on prisons. Wigbert Böhm: If a company is targeting one-time savings, it could get by without using ZBB, perhaps—or at least it wouldn’t require a digital tool to go through the exercise. According to a study by Accenture, only about 50% of companies can sustain cost savings for more than one to two years, and in such cases, traditional budgeting becomes ineffective. Consequently, "some states have selected arbitrary percentages to ensure that an amount smaller than last year's request is considered. Above all, budgets enforce ownership and accountability so that financial decisions are made sensibly.

It has a bad reputation for being a complete cost cutting exercise, but ZBB an help you align spend to more revenue generating opportunities. A zero-based approach to assessing and redesigning an organization shares many of the fundamentals of zero-based budgeting. ZBB offers a number of advantages, including lower costs, budget flexibility, and strategic execution.Sometimes, budgets can get out of control, or in some years, may show significantly higher or lower costs, depending on the overall market outlook and other external factors. Using a core set of design principles and architecture, companies should create templates for specific functions while allowing organizations to scale up or down based on their needs.

What usually ends up happening, however, is that companies that start with a limited scope see great impact from ZBB and often decide to use it more broadly. According to Jun Ma, a professor at the University of Nebraska, the beginning years of ZBB in Hubei were a bit rocky as the DBR had not yet been implemented in all the state departments in Hubei. A planning and budgeting solution should not only be a blank canvas for modeling: it should also contain planning intelligence and purpose-built capabilities for predictive planning, driver-based budgeting, robust “what-if” scenario modeling, sandboxing, top-down and bottom-up budgeting, and approvals and workflows as best practices that are readily available. With a whole host of nationwide and regional in-person events, webinars and more, Business Finance Week helps smaller businesses learn about the different finance options available to them to support their individual needs. The intended outcome is to access the efficient use of resources by determining if services can be provided at a lower cost.

a b c d e GAO, Performance Budgeting: Past Initiatives Offer Insights for GPRA Implementation (March 1997). With this approach, companies can capture significant efficiencies while upgrading capabilities and increasing value across functions.