Zero Based Budgeting

Zero-Based Budgeting is a technique of planing and decision-making which reverses the working process of traditional budgeting. In traditional incremental budgeting, departmental managers only justify only increases over the previous year budget and what has been already spent is automatically sanctioned. No reference is made to the previous level of expenditure. By contrast, in zero-based budgeting, every department function is reviewed comprehensively and all expenditures must be approved, rather than only increases. ZBB requires the budget request justified in complete detail by each division manager starting from the Zero-base. The Zero-base is indifferent to whether the total budget is increasing or decreasing.
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a method of budgeting in which past sales and previous expenditure levels are ignored; the company formulates its profit goals, determines the actions that will be required to achieve its goals, and estimates the expenditures that will be necessary to carry out the actions.

The process of preparing an operating plan or budget that starts with no authorized funds. In a zero-based budget, each activity to be funded must be justified every time a new budget is prepared.