Zero-Based Budgeting

While basic cost-cutting programs are important, they are often limited in their reach and impact. Zero-based budgeting (ZBB) is a methodology and technique that makes cost management an everyday way of life. It provides insights into true spend and rapid cost takeout, embedding a culture of accountability for ongoing cost.

Why Zero-Based Budgeting?

Unlike traditional budgeting and cost management processes that focus on which costs to take out, ZBB focuses on which costs to keep, allowing enterprises to allocate funds to areas that drive highest value.

ZBB challenges all expenditure and justifies spend from the ground up. Category and budget ownership are put in place to provide motivation, visibility and control to embed an accountability culture.

This robust method of budgeting can be applied to almost all types of cost, including capital expenditures, operating expenses and cost of goods sold. ZBB has proven to be a successful budgeting methodology and is recognized worldwide for the comprehensive savings it delivers, thereby freeing enterprises from unproductive programs, departments and functions.

  • Program expenditure is independent of budgets from preceding years ― each program is assessed at the beginning of a review cycle to justify funding for its respective line items
  • Budget allocation is based stringently on strategy goals, maximum ROI and functional performance, and is unconnected to allocation from past budgets
  • Increments or reduction to spend are not necessarily balanced across various budgets, allowing for greater accuracy and precision in expenditure planning
  • Promotes strategic alignment of funding with functional/program objectives, thereby ensuring improved spend management and overall cost effectiveness

See how ZBB can work for your business ― contact us today.

Our structured approach to ZBB allocates funding based on program efficiency and to the point of use rather than budget history or ownership. ZBB provides procurement and finance teams forensic-level insight into true spend types and their end-use locations to benchmark and target cost reduction across people, property, direct and indirect spend.

Drive Sustainable Growth and Profitability with ZBB

At GEP, we help our clients target and reduce their total operating costs by combining forensic insight with organizational, functional and internal benchmarking to define targets.

Through ZBB, we reset the baseline and then extract costs through various demand, cost, structure and process levers. We work with you to embed a culture of cost consciousness throughout the enterprise, and enable control and monitoring of category and budget governance.

Our ZBB experts analyze your spend and map your total costs to value chain activity to determine which activities add value and which ones don’t (good costs vs. bad costs), and select the right levers to influence the outcome and cost base.

Value Beyond Cost Reduction

GEP’s ZBB solutions go beyond cost reduction to unlock strategic value and help you:

  • Improve financial performance by reducing SG&A between 15 and 35 percent
  • Free up working capital and non-working dollars for investment in growth
  • Gain competitive advantage by repositioning the cost base and getting insight into fixed and variable costs
  • Enable agility and flexibility to respond to changing markets and demands
  • Understand spending patterns compared with the industry and competitors
  • Create a culture of accountability and cost consciousness while maintaining high levels of productivity and output

 

RELATED SERVICES

RECOMMENDED