Zero-Based Budgeting
Developing a Lean Budget in Tough Economic Times
Let's talk about budget creation, in times when every expenditure is scrutinized.
Consider a different approach to budget development. One of the initial actions in developing a lean budget is to switch from incremental budgeting (where you only address variances greater than last year's figures) to a zero-based budget (where you justify each and every expenditure, and account for every dollar of revenue).
Zero-based budgeting forces department heads to analyze the allocation of their resources, and to identify each and every expenditure needed for operations. You'll be able to see the areas where your budget is inflated, offering immediate savings.
With BudgetSense, you can easily create and build up zero-based budgets. Simply create a new Budget Definition, and make it available to your department heads for input.
Require detailed notes on each and every expenditure.
Make sure that each position is filled.
Review all vacant positions to determine if they are approved and needed.
Review Budget v. Actual expenditures with department heads quarterly, to keep them motivated and on target.
It's not too late to start this practice now. You will be able to see what your absolute revenues and expenditures are, and compare them to your voted-on budget to determine problem areas right away.
Most importantly, don't forget to budget for your revenues to ensure budgets are in balance - a balanced budget is a happy budget!