what is zero based budgeting

Zero-based budgeting is a budgeting method that requires all expenses to be justified and approved in each new budget period, typically each year. It was developed by Peter Pyhrr in the 1970s. Unlike traditional budgeting, zero- based budgeting starts at zero, justifying each individual expense for a reporting period. This budgeting method aims to put the onus on managers to justify expenses and drive value for an organization by optimizing costs and not just revenue. It analyzes an organization's needs and costs by starting from a "zero base," and every line of business within an organization is analyzed for its needs and costs while ignoring the previous year's budget. Zero-based budgeting can help lower costs by avoiding blanket increases or decreases to a prior budget, but it is a time-consuming process that takes much longer than traditional, cost-based budgeting