What is Zero bases budgeting (ZBB)
Meaning and definition
Zero base budgeting is a management tool for providing a sys tem for a careful consideration of actual in the context of budget requests and annual planning. It is thus a technique which was originally devised to help management in the difficult task of allocating limited resources more efficiently between projects and other cost items in the service or support areas such as production planning repairs and maintenance research and development quality control personnel fiancé and marketing
Zero based budgeting is a technique of planning and decision marking which reverses the working process of traditional budgeting. In traditional incremental budgeting departmental managers justify only increases over the previous year budget and what has been already spent is automatically sanctioned. No reference is made to the previous level of expenditure. By contrast in zero based budgeting every department function is reviewed comprehensively and all expenditures must be approving rather than only increases. ZBB requires the budget request justified in complete detail by each division manager starting from the zero base. The zero base is indifferent to whether the total budget is increasing or decreasing.