The Wisdom of Zero-Based Budgeting

The Wisdom of Zero-Based Budgeting

The concept of Zero-Based Budgeting (ZBB) has become a hot topic over the past few months – especially in an era where businesses are looking for ways to trim excess expenses that can eat into the bottom line.

The key principle of ZBB is that each line item in a budget must be justified. Some variations of the approach require expenses to be attached an identifiable ROI. The process overturns the traditional corporate approach to departmental budgeting, which blindly maintains the allotted amount from the previous year, with an additional percentage to reflect inflation or organizational growth.

Instead of merely rubber stamping the budget from the previous year, the Zero-Based model builds from the ground up, founded on the actual expenses that the organization anticipates. While some critics claim the ZBB may not provide the necessary breathing room for unexpected expenses and ad hoc growth initiatives, not all versions of the model are iron-clad, and each business that adopts this approach can allow for funds that may be used for unforeseen problems or opportunities.

The wisdom of the Zero-Based Budgeting is that it requires a business to review its actual expenses on an annual basis, and plan with an eye to what is coming rather than coast on the assumption that the future costs will be identical to those of the previous four quarters.

It also short-circuits the year-end spending spree that so many departments engage in simply to justify their budget for the following year.

At Kreller Consulting, the Zero-Based approach has been one of numerous strategies we use to realign data subscription costs at major and midsize companies – for over 30 years. Our process has helped clients save millions off their annual expenditures with vendors such as Dun and Bradstreet, Equifax, Experian, Lexis Nexis, TransUnion, and many more.

If you would like to find out if we can identify and realize a substantial savings on your contracts with any of these providers, all it would take is a brief, 10-minute call to get the process started. For further details, contact Chris Harsh directly: | 513.723.8904.

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