Zero-Based Budgeting (ZBB)

Updated September 2026Finance Software Glossary

Zero-based budgeting (ZBB) is a budgeting method in which every expense must be justified from zero each cycle, rather than starting from last year's spend and adjusting it. Managers build each budget line from the activities it funds, which forces a review of costs that incremental budgeting would carry forward automatically.

In practice, managers define the activities their department performs, cost each one and rank them, so leadership can fund from the top of the list down. The method surfaces legacy spend that survives only because it was in last year's budget, such as software licenses nobody uses or contracts that renew unreviewed.

Full ZBB across a company every year is rare because the workload is heavy. Common variants apply it to a few cost categories at a time, run it on a two-year or three-year rotation, or use it once as a cost reset after an acquisition or a margin squeeze. Critics note that when it's imposed purely as a cost-cutting exercise, the analysis quality tends to be low.

In software: ZBB is a process choice more than a product category, but budgeting platforms make the workload manageable. Prophix and Vena handle the template and approval cycles a line-by-line justification requires, and Anaplan supports activity-level cost models that roll up to the budget.