Zero-Based Budgeting

Reset your finances with zero-based budgeting.

Author

Rameel Sheikh
August 15, 2024

Zero-Based Budgeting

Insight from Healy Jones

Time to cut costs? You’re not alone!

It might be time to give zero-based budgeting (ZBB) a shot.

ZBB is like hitting the reset button on your company’s finances—every dollar has to earn its place, and every expense drives the company forward.

So, what is it?

Unlike traditional budgeting, where you simply tweak last year’s numbers, ZBB requires you to start from zero each period. 

Every expense must be justified from the ground up. It’s an intense approach, but it forces a deep dive into spending, aligning every dollar with your strategic goals.

To put ZBB into action:

  1. Set clear goals that align with your strategic objectives (secure another round, achieve profitability, etc.)

  2. List all activities needed to reach those goals, starting from scratch.

  3. Sit down with each team to analyze and justify every expense—if it doesn’t directly contribute to your objectives, it’s cut ✂️

  4. Streamline spending by eliminating redundancies and unnecessary costs.

  5. Compare your new budget with historical spending to keep it realistic.

It’s not easy, but you can think of it as giving your budget a full-body workout—no pain, no gain 💪

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