Zero Based Budgeting and its Significance

Zero-based budgeting (ZBB) is a technique for aligning business spending with strategic objectives. The approach requires organizations to build a zero-year annual budget to verify that all components of the annual budget are economical and relevant and contribute to better savings. Effectively applied, ZBB is expense strategies which can help companies strengthen their resource allocation, dedication to employees and organizational teamwork. ZBB also gets praise for cost reduction initiatives, but its strategy cannot be focused solely on efficiency and checking hypotheses, solving problems, and ensuring the spending remains consistent with the organization's development goals. If performance does not fulfill expectations, ZBB can help companies to determine the best approach in the coming months. This paper shows the importance of ZBB, with the approach of budgeting; each expense needs to be justified before its addition to the budget. The main objective of this budgeting reducing the cost which is unnecessary by cutting each cost possible.