Zero Based Budgeting

Zero based budgeting is a method of budgeting where proposed expenditures must be justified for a given period of time in the future, such as an upcoming quarter or fiscal year. Past expenditures only serve as a guide, not as justification when using zero based budgeting. Every dollar must be accounted for in zero based budgeting. Often the outcomes of zero based budgeting are well-defined, yet the costs and timeliness are hard to ascertain. Zero based budgeting can help an organization save money and improve services. The downside to zero based budgeting is that it may increase the time and expense of preparing a budget and can cause complications if not done properly. Usually zero based budgeting can be applied to personal finances, as well as marketing and sales projects. Zero based budgeting is also encouraged for government agencies.