3 min read · Nov 7, 2023
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Cost in the business ensures the running of the business in future. Be it involved in expenses, budgeting, admin expenses, etc Cost plays an important role in maintaining the growth as well as reputation of the business. But sometimes, the over-expenses or overspending of the money leads to the downfall of the business and even bankruptcy. So, it becomes mandatory to know the distribution of cash correctly in the business and avoid unnecessary expenditure. There are many techniques that can lead to cost-cutting in business. In this blog, we will talk about zero budgeting and its ways of cost-cutting in the business.
What is Zero-Based Budgeting?
Zero-based budgeting is a form of budgeting that helps in cost-cutting in business. This new form of budgeting makes a new strategy, evaluates the cash flow according to the expenses and creates a new budget. In the continuation of formatting the budget, the activities are re-evaluated and initiated with starch.
Before making this type of Budgeting, consider that there are no current expenses, no manpower, no office, no rent, no admin expenses and more. In this stage, the company create the budget from starch.
Steps to implement Zero-budgeting in your business:
Identify the objective of your company for this year
Always plan the biggest objective for your company every starting year of the financial year. Such as your company’s objective is increasing sales, product development, brand awareness, etc.
Distribute objectives into departments
After defining the objectives of your company, then divide them into departments. Such as marketing objectives should go to the marketing department, finance in the finance department, etc.
Dont use last year’s budget
Analysing the company’s goal on the basis of last year will not let you think about new innovations in business. Your approach will be not objective-oriented.
So, always think about the objective not the numbers of last year.
Classify expenses into must-have & Good to have
Divide your expenses into “must-have” and “good-to-have”. With this, you will understand what expenses are needed and not to be needed in the business.
Reduce ‘Good To Have’ Expenses
Analysing the major expenses and not many important expenses in the business. Find measures and techniques to reduce the good-have expenses in the business.
Must-Have Expenses should be goal-oriented
The most important expenses should have a goal and objective in the business. Every expense should give good returns in the future.
Automate business and standardise processes
Make your business an automated function so that things go automatically and also standardise the process for better future growth.
Implement Zero-based budgeting in a few departments
Implement zero-based budgeting initially in a few departments and then set an example within the organisation to formulate the same techniques in other departments as well.
Leaders & Team-involvement & Execution
Creating a Zero-based budgeting system in certain departments with the help of leaders and executing it in other departments with team involvement.
Communicate, Communicate, Communicate
Communication is the key to solving any miscommunication. At the time of zero-based budgeting, the negative can spread much more quickly than the positivity. So, always communicate with the leaders, team members, etc to maintain positivity within the organisation.
