Managing A Budget: Starting from Zero

Managing A Budget: Starting from Zero

It was all so easy a few years ago. Come budget time, you pulled up last year’s spreadsheet, talked to your managers, added 5% and shipped off next year’s budget to the chief financial officer. Now, you have to look at every buck before you spend it.

Enter zero-based budgeting. You start with no money in your budget—and have to justify every expenditure.

This can be an exhaustive process involving significant staff hours. But in a business climate in which staying lean and cutting costs are essential to survival, this kind of comprehensive annual review of all expenditures is fast gaining adherents.

You can apply the principle through the year. “Just-in-time budgeting” is an approach where projects are not funded annually, but as needed throughout the year. More frequent and case-by-case reviews of spending may be harsh, but you are likely to face this if your company is to thrive in tight times, says Barbara Gomolski, an analyst at Gartner Inc., which pioneered the “just-in-time” concept of budgeting.

Download the following Excel quizto weigh your budgeting considerations.

Copyright © 2004 Ziff Davis Media Inc. All Rights Reserved. Originally appearing in Baseline.