This is a guest post from Labatt Brewing Company Ltd.
(Member since 1969)
Do you have ever escalating budgets? Are you able to say precisely where your company spend is going? Are you able to reallocate spend knowing exactly what is being sacrificed? Do you know when you need the cash on hand for that spend? Many businesses aren’t able to answer these questions. But there is a solution that can make sense of all these questions when it comes to what your company spends on.
Zero Based Budgeting (ZBB) is a method of organizing, analyzing, and making decisions on how business expenses will be made. It is the method and not the decision of what to spend on.
The final product of ZBB implementation and operation is unique to every business. ZBB is highly adaptable and can suit almost any business hungry to know how they spend money.
ZBB works to create granularity in business spending ownership and outcome. Specifically, ZBB helps define what individual expenses will occur, what they cost, when the costs take place, and who is responsible for the expense. ZBB provides expenditure visibility down to the individual planned purchase details, vendors, amounts, and timing.
In contrast to a conventional budgeting approach that simply provides adjustments to the existing spend base, ZBB starts from nothing and builds a complete business spend view. Through ZBB, expenditure details are available to front line management up through to the C-Suite. These details include spending visibility and timelines, enabling educated business decisions.
ZBB itself does not make any decisions but enables the insights that should drive your business decisions. It provides the data to have open and honest conversations within and between departments on where company funds are allocated in true complete detail.
From the visibility ZBB establishes, decisions can then be made thoughtfully to address spend inefficiencies, reallocate spend based on type or department, and provide the business with a tool that enables flexibility to adapt to changing business needs.
Enabling ZBB within your organization will enable a powerful tool for clarity and control of expenditures. Implementation of ZBB is easiest during budget planning, prior to execution, but can be done at any time. As ZBB is a method of organizing, analyzing, and making decisions on expenses, it is critical to ensure a planned and well-communicated strategy prior to and during implementation. Overall steps to ensure success in implementation include a clear explanation of why your organization is implementing the ZBB methodology, what the implementation aims to achieve, a calendarized process map, an explanation of each milestone, expected inputs, and expected outputs.
If these benefits sound like a good fit for your organization, Zero Based Budgeting is suitable for implementation right away.
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