Zero-based budgeting

Last updated: 20.03.2016

Zero-based budgeting is the opposite approach to incremental budgeting as it begins the budgeting process from zero. Therefore, no past results are considered and budgets “are built” from item to item from the very beginning. It is very lengthy process and therefore, zero-based budgets are not often prepared for the entire entity in just one budgeting period, but only a certain area/s are reviewed during a time and the next areas are left for the future periods. Zero-based budgeting is appropriate for costs that are not so easy to quantify – usually costs of support departments or costs (or revenues) for specific jobs and contracts.

The advantages and disadvantages of zero-based budgeting can be derived from those described in the article about incremental budgeting

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