Zero-Based Budgeting Method
A comprehensive, in-depth process that effectively deconstructs the cost base, dissects and analyzes the fundamental elements that drive each expense category, and re-builds the cost structure from the ground up. The resulting savings opportunities are then embedded directly into the budget, with accountability clearly assigned and a solid tracking method outlined.
Purpose
To drive a comprehensive, in-depth review of expenses in order to identify cost savings opportunities and integrate those initiatives into the budget process.
Process
- Engage the organization and its people, explain the concept of zero-based budgeting, its purpose, the process, and the end result.
- Perform an in-depth analysis of the targeted expense areas, review trends, and compare to benchmarks.
- Applying various techniques such as expenditure value assessment, Lean Six Sigma and best practice comparison, evaluate individual expense items and identify cost savings opportunities.
- Review consumption practices, cost negotiations and expense policies and recommend changes where necessary.
- Establish budget guidelines and targets for each expense.
- Present to management for review and discussion.
- Review budget submissions and determine impact on overall budget and company objectives.
- Ensure that execution plans identify a timeline for completion, resources required, and assign accountability.
- Monitor progress to ensure obstacles are cleared and targets are met.
Results
An all-inclusive, in-depth cost reduction program that captures significant savings from an organization’s cost base, improves the bottom line and ensures the company remains competitive.
Case study # 2 describes a project that generated $12M in savings annually for our client using the Zero-Based Budgeting methodology. It also includes an enthusiastic endorsement of this cost reduction method by a major multi-national company. For details please click on Case Studies.