As the name implies, zero-based budgeting (ZBB) is a method of budgeting in which all expenditures for a new period or year must be justified from scratch, as opposed to being based on an already-existing budget and then being tweaked as necessary.
ZBB is a powerful tool for strategic business planning since it allows you to pinpoint and cut out wasteful expenditures, maintain tight financial management, and prioritize projects with the greatest potential for financial gain.
All forms of budgeting (including zero-based budgeting) are simply the means by which a corporation puts its long-term strategy into practice. A company needs to translate its long-range plan into a specific set of predicted revenues and expenses that can be measured to track performance in order to achieve the financial and operational goals outlined in the strategic plan. These can be fine-tuned and altered as necessary to help the organization stay on pace to meet its objectives.
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