What is a key drawback of a zero-based budgeting approach?

A key drawback of a zero-based budgeting approach is that it can be time-consuming and resource-intensive. This budgeting method requires managers to justify every expense for each new period, rather than simply adjusting previous budgets based on historical expenditures. This comprehensive review process means that every line item in the budget must be analyzed and validated from scratch, which often requires significant time, effort, and resources from staff.

While this method has its advantages, such as ensuring that funds are allocated based on current needs rather than historical spending patterns, the intensive nature of developing a zero-based budget can lead to delays and may divert resources away from other critical planning and operational activities. This challenge can be particularly pronounced in larger organizations with numerous departments and complex operations, where the deep dive analysis can become even more cumbersome. Understanding this aspect of zero-based budgeting helps clarify its practical implications in real-world applications.