What's the difference between zero-based budget and traditional budget?

The traditional budget is generally based on the previous period, and then consider the reasons for the current increase or decrease.

Zero-based budgeting is a budgeting method that does not consider the actual situation in the early stage, that is, the number in the early stage is based on zero. It means that all budget expenditures are based on zero in financial budgeting, regardless of the past situation, and only from the actual situation to study and analyze whether each budget has the necessity and amount of expenditure.

The zero-base budgeting method is completely different from the traditional base adjustment budgeting mode, and there are three main differences:

The basis of the budget is different. The base adjustment budget method is based on the results of the previous period and determines the budget amount of this period according to the performance adjustment of the previous period. The basis of zero-based budget is zero, that is, the budget amount of this period is determined according to the importance of the current activities and the amount of funds available for distribution. The objects of budget analysis are different, and the base adjustment budget method focuses on the cost-benefit analysis of new activities, but does not conduct in-depth analysis and research on IT activities with the same nature as the previous ones. Zero-based budgets are different. It needs to re-analyze the cost-effectiveness of all IT activities in this period. The emphasis of the budget is different. The base adjustment budget method mainly controls the increase and decrease of the budget amount, while the zero-base budget not only pays attention to the amount, but also allocates limited funds mainly from the necessity and priority of IT activities.