Gartner Research

Zero-Based Budgeting: Overcoming Historical Influences

Published: 04 April 2019

ID: G00706984

Analyst(s): Finance Research Team

Summary

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.

Table Of Contents

Challenge 1: The Business Zero-Bases the Cost of Ongoing Activities Without Questioning the Need for Those Activities

Solutions

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

Solutions

Solution 1: Create Opportunities for the Business to Win Back Funds

Solution 2: Establish Dual Ownership of Costs

Conclusion

About This Research

Endnote

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