Zero-Based Budgeting
Definition
Building a budget from zero each period, where every expense must be justified on its own merits instead of starting from last year's numbers.
Want a deeper explanation?
Zero-based budgeting is a good way to clean out costs that crept in over the years, especially software, subscriptions and agencies.
It takes more time than adjusting last year's budget, so many businesses do it every year or two. Watch for: cutting costs that drive revenue, like proven ads, just because they are large.
Example
Instead of adding 10% to last year's $60,000 software budget, each tool is reviewed. Eight unused subscriptions are cut, and the budget drops to $41,000.