What is an advantage of using a zero-based budget approach?

Using a zero-based budget approach is advantageous because it requires justification for all expenditures, which ensures that every dollar allocated has a specific purpose and aligns with current organizational goals. This method starts from a baseline of zero, meaning that every expense must be reevaluated and justified for the new budget period rather than simply carrying over prior budgets. As a result, this approach encourages accountability and promotes a careful examination of all spending, potentially leading to more efficient use of resources and cost savings.

By requiring each department or project to justify its budget from scratch, the zero-based budgeting process fosters strategic thinking and helps organizations prioritize essential expenditures over less critical ones, ultimately leading to better financial management practices.