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Zero-Based Budgeting

Zero-based budgeting (ZBB) is a budgeting method in which every expense must be justified from scratch for each new budget period, rather than starting from the previous period's budget and adjusting incrementally. Under ZBB, the baseline is zero — every cost must be evaluated, prioritised, and approved based on its current value to the business. This approach forces a rigorous review of all spending, challenges embedded cost assumptions, and prevents the perpetuation of historical budget allocations that may no longer be relevant.

Why This Matters

Traditional budgeting inherits the past. If a department spent a certain amount last year, this year’s budget starts there and adjusts at the margin. Over time, this embeds costs that nobody questions because they were always there. Zero-based budgeting breaks this cycle by requiring every cost to earn its place. For mid-market companies looking to improve cost discipline — especially after a period of rapid growth where spending outpaced structure — ZBB is an effective way to separate necessary spending from inertia.

Where This Fits

This term sits within the Planning & Projections area of Performance & Control.

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