To ZBB or not to ZBB? That is the question!
Zero-based budgeting (ZBB) 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 little fluctuation or change, e.g., the “status quo”. Or in other words – almost no one.
In today’s competitive and economically 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 ZBB 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. ZBB 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 ZBB, and tried to present a balanced overview of the benefits (along with the potential risks) to help you decide if ZBB is right for you, and support your efforts if you decide to implement this model. Perhaps the best news for finance teams considering ZBB, 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 – a non-profit, private graduate school that implemented a hybrid ZBB model and the benefits (and lessons learned) they gained along the way.
If your organization has experience with ZBB (positive or negative) we’d love to hear from you. Please send us your thoughts to info@XLerant.com