Companies Turn to Zero-Based Budgeting to Cut Costs During the Pandemic

By Kristin Broughton.

The tactic is helping finance chiefs trim expenses and prepare for possible long-term changes in business travel and other spending areas

The economic downturn is forcing finance executives to take a more detailed look at their companies’ spending. One tactic they are turning to is zero-based budgeting, a technique growing in popularity.

Companies including General Motors Co., Guess? Inc. and Signet Jewelers Ltd. are using zero-based budgeting to slash costs and navigate the effects of the coronavirus pandemic.

The expense-management strategy requires finance executives to question and justify each line item in their budgets from the bottom up.

That stands in contrast to more traditional budgeting techniques that involve adjusting the previous year’s spending and cutting top-line budget amounts by a flat percentage based on economic forecasts.

Source: WSJ (2020)

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