FP&A Trends Group held another global webinar on February 9, 2021 with over 430 participants joining from around the globe to discuss zero-based budgeting’s next evolution, zero-based financial planning & analysis (FP&A).   

There are several new trends in zero-based budgeting (ZBB):

• It is applied not only to expenses (P&L, BS, CF)

• It is used to identify key internal drivers for driver-based planning

• It can help completely rethink the FP&A, targets and incentives processes

• It is a collective exercise requiring a joint effort

Tom Vanoverschelde, Portfolio Finance Director at Capita, kicked off the panel discussion highlighting the benefits of ZBB, including significant cost reductions and cultural transformation that drives better accountability and ownership for the budget. ZBB was traditionally very labor intensive, but better technology and better data are helping companies to more easily implement ZBB and benchmark themselves against their peers. To be successful, Tom stressed the importance of senior management engagement, “Communication is key.”

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Dawn LaDuke, Vice President FP&A Global Supply Chain at Nature's Bounty Co., highlighted the benefits that ZBB can bring to a business. She noted that it yields, “more thoughtful spending,” bringing awareness to forgotten and redundant costs and highlighting where spending may not align with the strategic priorities of the business.  

Dawn also highlighted the importance of ensuring that ZBB feels positive and adds tangible value to the business. She stressed the importance of celebrating the wins and noting the initiatives that the program successfully funded.   

Dawn mentioned 5 critical steps for a successful ZBB implementation:
  
1. Determine your objectives early in the planning process
2. Develop the strategy & timeline
3. Partner & Provide Resources for:

• Training

• Work sessions 

• Reference data

4. Link investment activity to strategic plans
5. Introduce & educate to deliver a culture & mindset change

Wrapping up the panel of experts, Lawrence Serven, Regional Director and Thought Leader at Board International, highlighted the ability of technology to make ZBB much easier today than ever before. Lawrence stressed the importance of having “one version of the truth” so that the business can focus on making improvements, not debating the data.  He believes that the number one stumbling block for businesses that implement ZBB is that it’s too difficult and the best way to overcome that is to use technology. The tools should be so simple, he explained, that senior leaders need only two minutes of training and can focus their efforts on improving the business, not the mechanics of ZBB.  

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Larysa Melnychuk, Founder and CEO at FP&A Trends Group, then presented questions from the participants who joined the webinar, including a question about how long it would typically take to implement ZBB.  Lawrence said that although many factors would influence the timing, particularly the level of detail in the ZBB and the size of the business, he estimated it should take roughly 3-6 months to implement a good ZBB program. 

Conclusion

Overall, ZBB can generate very significant cost savings but it needs executive buy in. This is not an easy implementation and many people will not like it. Overly aggressive implementation will give benefit in the short term but can be detrimental in the medium or long term. Therefore, it needs to be part of a wider strategy.

We would like to thank our global sponsor Board International for great support with this  FP&A Trends Webinar.