In today's corporate and economic environment, it's no surprise that many organizations are moving away from conventional incremental budgeting processes. Leading enterprises are adopting granular, driver-based planning to optimize cost structures and reallocate capital more strategically.

Zero-based budgeting (ZBB) is a proven approach that does more than reduce spend—it makes organizations more financially resilient and reinforces an ownership culture where associates treat each dollar as if it were their own. By promoting greater transparency and accountability in financial decision-making at all levels of the organization, ZBB gives organizations more agency over how much they spend and where.

What is zero-based budgeting?

ZBB is an alternative approach to enterprise budgeting that requires companies to create a new budget each fiscal year. Line-item owners must provide concrete justification for every dollar the organization plans to spend, ensuring enough resources are allocated efficiently and aligned with the strategic priorities.

ZBB can help businesses achieve:

• Significant cost reductions;
• A culture of increased fiscal discipline;
• More accurate strategic alignment; and
• Optimized resource allocation.

How zero-based budgeting works

ZBB's basic principle begins with a base of zero and builds a budget from the ground up. A typical ZBB flow for enterprises includes:

1. Defining objectives and budget targets
2. Identifying and mapping all activities and associated costs
3. Categorizing expenditures by business necessity and value
4. Developing cost drivers and performance metrics
5. Assigning ownership and accountability at the line-item level
6. Integrating ZBB into the broader planning and budgeting process
7. Implementing cost tracking and variance monitoring

Zero-based budgeting vs. traditional budgeting

Traditional budgeting relies on the previous year's budget, while ZBB starts from zero, requiring justification for all spending. This enables value-based decision making, strategy-aligned allocation, transparency, and cost-driver-level granularity.

5 ways ZBB enhances budgeting processes

1. Improved cost governance and transparency cascaded throughout the organization
2. Faster, data-driven decision making
3. Strategic resource allocation
4. Value creation and innovation
5. Increased agility and performance resilience

The challenges of zero-based budgeting

While ZBB streamlines capital allocation and cost governance, it requires cross-functional sponsorship, clear decision rights, and robust execution. Challenges include the resource intensity of implementation, change management hurdles, and the balancing of short-term savings with long-term goals.

How ZBB mitigates cost shocks

Cost shocks include supply chain disruption, trade policies and tariffs, energy and commodity volatility, labor market pressures, regulatory changes, rising financing costs, and technology investment cycles.

ZBB helps enterprises respond to cost shocks by creating visibility into discretionary and non-essential spend, enabling targeted cost reductions and resource reallocation. While not inherently real-time, ZBB can support faster course corrections when paired with Agile planning processes.

Key considerations in the zero-based budgeting process

Critical elements include financial transparency, structured governance, ongoing performance evaluation, and a focus on value-based spending. Successful ZBB efforts also require strong change management and the ability to embed cost discipline into day-to-day operations.

Zero-based budgeting with Bain & Company

Bain brings an Agile capability-building approach to ZBB, helping organizations achieve granular cost visibility, strategically aligned budgets, clear accountability, performance-linked incentives, and a culture of sustained cost discipline. Through Bain Academy, business leaders and budget owners gain the skills and tools needed to lead effective zero-based transformations.

Why trust us?

With Bain, clients see consistent savings of 15%–25% through zero‑based budgeting, backed by a methodology that builds ownership mindset, cost transparency, and continuous performance improvement. Bain doesn’t just set cost targets—we embed tools, governance, and skill‑building to make sure savings stick.