zero-based budgeting business definition

A method of allocating financial resources such that each budgeting entity must justify all of the period's planned expenditures. Thus, funds allocated in one period are not influenced by the allocation or use of funds in the prior period. Zero-based budgeting is designed to improve the efficiency of an organization by directing funds to the parts of the organization that are most deserving rather than to those that received the bulk of last period's funds.