Is it A New Era of Zero-Based Budgeting? The 19th London FP&A Board was actively debating on the subject this March. Zero-Based Budgeting is an old concept that evolved significantly in the last couple of years. If it is used for identification and management of key business drivers, it can help to streamline the driver based planning process while improving the qualities of planning and forecasting cycles. It can also help in developing more flexible budgeting processes and more analytical cultures.
The Meeting Agenda
- Zero Based Budgeting (ZBB): key definitions and principles
- ZBB as a basis for flexible Driver-Based Planning
- A case study from the field: "The Link between ZBB and Driver-Based Planning". Presentation by William Howell, Head of FP&A at Honda (UK manufacturing)
- A case study from the field: “ZBB in Kraft Heinz, part of the DNA”. Presentation by Tom Vanoverschelde, Operations Director Finance & Accounting at Capita
- Small groups discussion on ZBB implementations
- Conclusions and Recommendations
The Board was attended by 30 senior finance practitioners, representing international companies such as Johnson & Johnson, Lloyds Banking Group, Shell, Walgreens Boots Alliance and many others. Combining their expertise, the Board members came to several conclusions regarding the subject:
- ZBB improves the visibility of costs.
- It can be used on other lines of Balance Sheet and P&L.
- If it is implemented with the "key drivers" in mind, it can significantly improve FP&A agility.
- It can influence the business culture and FP&A's strategic and influential role.
- It could be successfully combined with other methods (e.g. Rolling Forecast, Scenario Planning, Integrated planning, etc.).
- It definitely breaks the "status quo" ZBB Cons.
- It requires time.
- It creates resistance.
- If not adjusted to the "new world" requirements, it could be waste of time.