Zero-based budgeting
Zero-based budgeting requires activities and resources to be justified rather than automatically inheriting last period’s budget. Managers can prepare decision packages describing objectives, alternative service levels, costs and benefits, which are evaluated and ranked. It can expose unnecessary expenditure but demands information and management effort, and ranking unlike benefits can be difficult. Zero-based does not mean pretending the organisation has no contractual commitments or starting every practical calculation without evidence.
Worked example
A support function compares minimum compliance, normal service and enhanced service packages, showing the cost and consequences of each before funding is allocated.
Common mistake
Do not confuse an activity package with a product’s base retail package or assume the cheapest service level is necessarily acceptable.
Where it appears in your exams
| Qualification | Exam | Relationship | Period |
|---|---|---|---|
| ACCA | APM | Direct | September 2026–June 2027 |
| ACCA | PM | Direct | September 2026–June 2027 |
