Zero-based budgeting is a budgeting method where all expenses must be justified for each new budget cycle.  This is in contrast to traditional types of budgeting where department managers only have to justify increases or decreases to the prior period budget. In zero-based budgeting, every function is analyzed and justified starting from a “zero-base”, as if the company was starting anew.  From this zero-base perspective, all the company’s departmental budgets are examined to see if their function contributes to the company’s needs in the upcoming period.  If so, a budget determination is made based on how much that department will need to perform its function. When used, zero-based budgeting forces managers to be more cost effective.  It also motivates employees by giving them greater responsibility in decision-making.  In addition, zero-based budgeting identifies budgets that may have bloated over time, wasteful and obsolete processes, and areas where outsourcing may be a better alternative. Zero-based budgeting is a much more difficult process than traditional budgeting, mostly because of the detail and training necessary to perform it accurately.  Because of this difficulty, many companies only use zero-based budgeting on a rolling period basis, reviewing just a few selected departments in this manner each year.  Another downside of zero-based budgeting is that it favors departments that generate revenue over departments such as HR and accounting where the benefits are less tangible.