To ZBB or not to ZBB? For finance teams considering the pros and cons of zero based budgeting – that is the question!
Zero based budgeting offers a lot of benefits for organizations seeking greater sustainability or a competitive edge. But it also has a fair number of challenges.
Traditional baseline budgeting (using the previous year’s budget as a starting point and making incremental modifications) works well for businesses and industries with very little change. Or in other words – almost no one.
In today’s challenging climate, companies and institutions from every sector are seeking innovative ways to tie business strategy to budgeting and eek out every possible profit.
Studies show that applying a zero based approach to budgeting combined with targeted budget cutting strategies, can increase profit by as much as 60% – a boon for profit and non-profit organizations alike!
But if it was that easy, we’d all be doing it. Zero based budgeting requires time and a (sometimes dramatic) shift in culture.
Is the benefit worth the initial investment in energy and effort from the already time-strapped financial team? These are the some of the questions we’ve attempted to tackle in our most recent Budgeting Brief – “Sizing Up Zero Based Budgeting”.
We reviewed the literature, talked to financial teams using a zero based approach, and tried to present a balanced overview of the benefits (along with the potential risks) to help you decide if zero based budgeting is right for you. And we’ve included some strategies to support your efforts if you decide to implement this model.
Perhaps the best news for finance teams considering zero based budgeting, it doesn’t have to be an “all or none” approach. Download the Budgeting Brief to read a case study from A.T. Still University . Learn more about this non-profit, private graduate school and how they implemented a hybrid zero based budgeting model. We also examined the benefits (and lessons learned) the finance team gained along the way.
If your organization has experience with zero based budgeting (positive or negative) we’d love to hear from you. Please send us your thoughts to info@XLerant.com