ZBB in vogue once more. How to automate it ?
ZBB is not a new concept but it has a new resonance for finance teams today. It’s not without complexity, however it is particularly well suited to a crisis (like COVID) where many previous assumptions are no longer valid. It does not have to be an all or nothing approach. ZBB can be enhanced by other methodologies including rolling forecasts and scenario planning. And contrary to conventional thinking, ZBB should not be viewed as a pure cost-cutting methodology but more of an holistic strategy management solution that funds the future.
A Fresh Start
The notion that a budget is recalibrated or reset and, without the chaos of prior year assumptions is liberating. It coerces finance teams to re-imagine the essence of budgeting, as opposed to simply tweaking last year’s budget a few percent up or down.?
How to Think About ZBB
1.???? ?Strategy Management & Reinvestment
·? Provide visibility into strategy and the associated funding to support the strategic pillars.
·? Understand all aspects of costs and what’s triggering them from a supply/demand perspective.
· Establish cost baseline and utilise benchmarks to set cost and re-investment targets across people and non-people cost categories.
2.??????Budgeting
·? Requires high level of specificity, detailing and justification.
·? Paramount that it’s supported by the right level of corporate policy.
·? Enhance and execute ZBB budgeting for priority cost categories and set budget and reinvestment targets for each supported by policy changes.
3.??????Accountability & Sustainability
· Develop and deploy cost category ownership matrix and governance structure to create accountability and ensure sustainable cost management and reinvestment across?categories and function levels.
4.??????Control & Monitoring
·? Define and enhance policies/controls for monitoring to enable to cross-organisation visibility, support early detection and prevention of cost overruns and track reinvestment.?
There are challenges implementing ZBB in an excel or legacy EPM environment, including: ?
·?? Managing operational targets requires targets that are matched to cost categories
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·??????Poor communication of targets across the enterprise
2. Budgeting & Approval
·?????Populating a plethora of spreadsheets with very detailed information is jarring on budget owners.
·??????Complex change management
·??????Version control issues
·??????Maintaining cost category governance
3. Consolidating & Reporting
·??????Consolidating multiple spreadsheets
·??????Reconciliation is complicated and time-consuming
·??????Duplicative reporting (Budget vs Actual)
4. Enterprise Performance Management
·??????Transfer of data into EPM is complex, slow and expensive
·??????Data management and processing duplication
HOW TO ENABLE & AUTOMATE ZBB WITH ACTERYS?
Have you experienced ZBB.?Would you recommend it to others?
Senior Business Analyst
3 年Enlightening!
Helping finance professionals master FP&A, Excel, data, and CFO advisory services through learning experiences, masterminds, training + community | Adjunct Professor in Data Analytics | Microsoft MVP
3 年It depends. I’ve worked with companies large and small that have implemented it and the results are mixed. For the orgs I’ve worked with that have been successful, they refrain from implementing ZBB org-wide. Instead they focus on divisions where ZBB makes the most sense and stands to benefit the most. In addition, ZBB isn’t done every year. Instead, it’s done every few. What I’ve seen in terms of success is when ZBB is implemented subjectively and conditionally, very unique to the org.