Zero-Based Budgeting (ZBB)

Zero-based budgeting (ZBB) is a budgeting method that involves creating a new budget from scratch for each financial period (one month, three months, six months, etc.) Users justify all expenses from a zero base each time, and ensure that each line on a projected return aligns with the company's goals. For example, if a company receives $10,000 a month, it uses that amount to budget for all expenses, debts, and savings until it has $0. Then it does the same the following month and so on.

What Small and Midsize Businesses Need to Know About Zero-Based Budgeting (ZBB)

SMBs, especially new companies with limited income, might use ZBB to justify operating expenses and keep expenses in check. Budgeting from a zero base each financial period allows them to account for every dollar in order to be more financially responsible.

Related terms