What is Zero-Based Budgeting?
Zero-based budgeting (ZBB) is a budgeting method in which every expense must be justified from scratch each new period, regardless of prior budgets. Managers build the budget from a zero base, line by line.
How It Works
- Identify decision units and decision packages.
- Cost-justify each package from zero.
- Rank packages and allocate funds to the highest-priority items.
Saudi Context
Saudi public-sector reforms under Vision 2030 pushed ministries toward performance-based and ZBB-style budgeting. PIF portfolio companies increasingly apply ZBB in cost-out programs.
Example
A Saudi retailer cuts SAR 15 million from G&A by rebuilding its budget from zero and challenging every recurring contract.