Zero-based budgeting
Zero-based budgeting starts each budget cycle from scratch, requiring managers to justify every item of expenditure rather than rolling forward prior-year figures. It challenges entrenched spending but is resource-intensive to prepare.
FrameworkBudgeting
See it move
Incremental budgeting starts from last year's figures and adjusts only for expected changes, which is quick but lets entrenched spending persist unexamined. Zero-based budgeting starts every cycle from a zero base: each activity is justified in its own decision package describing its cost and the effect of cutting it. That scrutiny is valuable but resource-intensive, so many firms apply it selectively rather than organisation-wide.
Check yourself
Which statement best captures the defining characteristic of zero-based budgeting (ZBB) that distinguishes it from incremental budgeting?