First, let’s talk about what is zero-based budgeting.
In ZBB, the budget starts over at zero at the end of each period.
This is why it is called zero-based budgeting (ZBB).
Each new budget comprises resources from scratch, regardless of previous goals set by the company.
It may be one of the longest-lasting ways to save money when done carefully.
Studies reveal that businesses can cut SG&A costs by 25% annually using ZBB.
When ZBB is used correctly, it has been shown to boost long-term productivity.
This is true for businesses that first find and fix the root causes of costs.
In ZBB, cost-cutting need not be significant as it is based on the top-down goal.
This means it is different for each company.
A common misconception is that ZBB is time-consuming and difficult.
Even though putting ZBB into place can take up to a year, it usually takes a lot less time than that.
The goal of zero based budgeting is to make it so that no one person has to take care of all the expenses.
All employees must use cost management strategies to cut costs everywhere.