Zero-Based Budgeting

Zero-based budgeting is a budgeting method that requires every expense to be justified each year, rather than simply rolling over the previous year's budget. In zero-based budgeting, all expenses are assumed to start at zero, and each department or program must justify every expense it requests.

The goal of zero-based budgeting is to ensure that all expenses are necessary and contribute to the overall goals of the organization. This can help to reduce waste, increase efficiency, and ensure that resources are being used effectively.

The zero-based budgeting process typically involves the following steps:

1. Identify programs and expenses: The first step in zero-based budgeting is to identify all of the programs and expenses that will be included in the budget. This might include salaries, supplies, equipment, and other expenses.
2. Review and justify expenses: Once all of the expenses have been identified, each department or program must review and justify its expenses. This might involve providing a detailed explanation of why each expense is necessary, how it contributes to the organization's goals, and what the expected outcomes are.
3. Prioritize expenses: Once all of the expenses have been justified, the next step is to prioritize them based on their importance and impact. This can help to ensure that the most critical expenses are funded first, and that resources are being used effectively.
4. Allocate resources: Once the expenses have been prioritized, the final step is to allocate resources to each department or program. This might involve setting a budget for each program, and monitoring expenses throughout the year to ensure that they stay within budget.

Overall, zero-based budgeting is a rigorous and detailed approach to budgeting that can help organizations to better manage their resources and achieve their goals. By requiring every expense to be justified each year, zero-based budgeting can help to reduce waste, increase efficiency, and ensure that resources are being used effectively.

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