Zero Base Budgeting – More than just short-term cost management
Short-term safeguarding of results and cost savings? Active cost management? A situation like the current corona crisis not only presents companies with unexpected challenges. It also offers opportunities to break up structures and thus release considerable earnings potential and reserves in the short term.
Such an opportunity is offered by „Zero Base Budgeting“ (ZBB), which has been in existence for decades. Despite its proven effectiveness and efficiency, it is still mostly only applied by companies in critical situations. Unjustly so!
ZBB is an analysis and planning method that aims at saving and redistributing resources according to company-specific necessity and effectiveness criteria. And the objective is the same for all departments in a company.
Each division and department must define different measures that are aligned with the current corporate goal. These measures can have different alternatives. (e.g. implementing optimized energy management or making investments, repair and maintenance, etc.) : minimum, normal, special solution). Then, result-oriented priorities are assigned to the measures. The available resources are allocated to the most important and effective measures – a structured ranking is carried out according to financial and time expenditure on the one hand and assumed profit contribution on the other. Classical budgets, from which „traditional“ is transferred from period to period or which can be defended, are abolished. Any entrepreneurial use of resources is based on a comparison of available means and achievement of objectives. It comes close to a continuous GreenField approach, whereby the ZBB approach is methodologically and procedurally a permanent solution for companies of all sizes.
Cross-departmental communication and transparency experience a real boost in these companies. However, the clear identification of the ZBB management is crucial for success. The short and also long-term successes with regard to an efficient use of company resources are – where ZBB is consistently applied – convincing.
As ADCONIA, we have extensive experience in the development and implementation of the ZBB process in companies. A major advantage is that the measures take effect at very short notice and are linked to active cost management. In this way, companies secure their liquidity and achieve the necessary transparency regarding the targeted use of available funds and resources.
Contact us and arrange an initial meeting with one of our partners at short notice.
Managing Director, ADCONIA GmbH