The number of companies referencing zero-based budgeting during quarterly earnings calls increased from 14 companies in 2013 to roughly 90 companies in 2015. With the rise of zero-based budgeting in the CPG industry, how can managers effectively and efficiently make the best budgeting decisions?
Rather than building from the previous year’s budget, zero-based budgeting requires managers to build their budgets each year from the ground up. This approach forces managers to justify the value of each budget line for the upcoming year.
Proving the value of dozens or even hundreds of initiatives, however, can be difficult and time-consuming. Running tests in a small subset of stores or markets can enhance the zero-based budgeting process by helping managers quickly and precisely identify the incremental impact of each initiative across functional areas: (more…)