Zero based budgeting
Enabling finance to drive better decisions on portfolio and cost management
The swift pace of change in today鈥檚 competitive business world is driving chief financial officers (CFOs) to uncover new ways to dramatically reduce waste, grow the top line, and sharpen their competitive edge. CFOs are rethinking their approach to budgeting and have discovered that zero based budgeting (ZBB) has made a big comeback over the past decade.
With traditional budgeting, an incremental percentage is applied to the current budget. Or, budget line items are carried over to next year鈥檚 budget with the assumption that it is business as usual. This method doesn鈥檛 require managers to re-examine what is needed for the following year or finance to identify where to allocate resources most efficiently. But with ZBB, managers build a budget from scratch without using the prior period鈥檚 budget as a baseline.
Incredible advances in technology and data and analytics (D&A) capabilities have alleviated the primary roadblock to ZBB adoption. Today鈥檚 powerful intelligent automation (IA) applications can enhance and streamline the complex work of analyzing data from multiple stakeholders, identifying spending patterns, highlighting key drivers of expenses, and allocating specific costs鈥攁ll in a fraction of the time once required by manual processes and spreadsheets.
Not just cost savings
It鈥檚 critical to understand that while ZBB typically generates cost savings, it鈥檚 not just about cutting costs. Equally, if not more important, it鈥檚 an effective approach to shifting the mind-set of managers and planners and ensuring that an organization鈥檚 limited resources are spent in the right places and achieve the most efficient returns.
In addition, ZBB encourages greater cooperation among different functions and fosters a 鈥渂usiness owner鈥檚鈥� perspective within stakeholders. Ideally, this persuades them to evaluate each expense as a strategic investment in the growth and sustainability of the company.
ZBB represents the next phase of a company鈥檚 budgeting and finance strategy. It offers finance organizations an opportunity to improve margins, realize benefits from acquisitions, allocate resources strategically, and have better insight into costs.
In this paper, explore four key elements for successful ZBB implementation.
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Zero based budgeting
Enabling finance to drive better decisions on portfolio and cost management
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