Zero-based budgeting is one example of a bottom-up budgeting process.
As a way of ensuring your budget remains aligned with current financial performance and priorities, zero-based budgeting (ZBB) makes “zero” its starting line. While traditional budgets rely on your current year’s budget as a jumping-off point for the new year’s budgeting cycle, ZBB takes a different approach, wiping the slate clean every time.
With traditional (or incremental) budgeting, certain expenses are fixed, while deeper analysis is reserved for new expenses. This can help to quickly seed your plan, but also means you potentially miss out on changes to your business operations, as well as possible cost savings and investments that might help your organization evolve.
“SaaS companies must achieve annual growth rates greater than 20% if they want to survive.”
ZBB, on the other hand, can promote transparency and a holistic, organization-wide view, while giving departments an incentive to look for potential cuts. Every expense is connected to ongoing financial performance and company goals, and new and ongoing expenses are examined with the same level of scrutiny to see where funding should go.
By starting at nothing every time, ZBB makes sure every expense is connected to ongoing financial performance and aligned with company goals–an approach that can have both advantages and drawbacks.
With the right organizational culture in place, zero-based budgeting can help you move your planning process and decision making forward. But of course, zero-based budgeting isn’t the only option–there are several ways to approach your budgeting, depending on your goals.
The purpose of a zero-based budget is to eliminate the automatic assumption of growth in order to focus carefully on expenditures and individual revenue streams. When nonprofit leaders fail to approach a budget with a more granular method like that which zero-based budgeting requires, things get missed, large revenue streams swallow up small ones, and excess funds are used as financial padding to fund budget contingencies rather than spent intentionally to maximize return on investment. As you adeptly oversee your nonprofit’s finances, you’ll reap substantial advantages from a robust back office toolset equipped with automated processes aimed at enhancing and simplifying your bookkeeping and accounting operations.
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To support your non-profit’s growth and strategic planning, using a tool that has a low learning-curve helps speed user adoption: We have demonstrated expert skills in leveraging an Excel-based Budgeting and Forecasting Software. With seamless integration with source systems, powerful financial forecasting capabilities, and Excel-based budgeting templates, Vena empowers your organization to achieve its goals.
Request a demo today to discover how we can elevate your non-profit budgeting process and foster a brighter future for your organization.
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