Zero-based budgeting is making a comeback in the corporate enterprise world — partially thanks to software tools that make it easier to manage.
Zero-based budgeting aims to put the onus on managers to justify expenses and aims to drive value for an organization by optimizing costs and not just revenue. Finance managers plan each year’s budget as if starting their department from scratch—contrary to the prevailing method of adjusting the previous year’s spending. The technique forces them to justify the costs and evaluate benefits every 12 months. The savings generated from the improved process can be immediately reinvested in the business.
There are several reasons zero-based budgeting is experiencing a revival. First, it forces managers to challenge the status quo. And in today’s fast-changing business world, this is more important than ever as business cycles change faster and faster. Managers can no longer just assume a percent increase over last year.
Second, new technology such as big data and artificial intelligence provides new views of data and information that were not previously available and this helps managers to make the granular decisions required for zero-based budgeting.
Finally, software tools now exist to make the detail-oriented nature of zero-based budgeting easier to manage. For example, the NetSuite Planning and Budgeting Cloud Services application supports zero-based budgeting along with flexible modeling, ‘what-if’ analysis, and comprehensive reporting and analysis.
Interested in learning more about zero-based budgeting and the tools drive its revival? Contact us for a free consultation.