Published: 04 April 2019
Analyst(s): Finance Research Team
Zero-based budgeting requires organizations to build budgets from scratch, but past budget decisions and trends tend to influence businesses’ thinking. This research shows financial planning and analysis leaders how to curb these influences and help businesses create truly zero-based budgets.
Challenge 1: The Business Zero-Bases the Cost of Ongoing Activities Without Questioning the Need for Those Activities
Solution 1: Frame the Business’s Thinking in Terms of Organizational Priorities, Not Line Items
Solution 2: Pressure-Test Activities for Strategic Alignment Before Pressure-Testing the Cost of Those Activities
Table 1: 3 Criteria Determine Criticality of Identified Activities
Challenge 2: Businesses Are Hesitant to Propose Costs That Are Below Past Spending Levels
Solution 1: Create Opportunities for the Business to Win Back Funds
Solution 2: Establish Dual Ownership of Costs
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