What does zero-based budgeting require for every line item?

Zero-based budgeting requires a complete justification for every line item within the budget. This approach starts from a "zero base," meaning that each expense must be justified from scratch, rather than being based on historical spending or previous budgets.

In this budgeting method, every department and manager must evaluate and justify their needs and the costs associated with them, ensuring that all expenditures are necessary and aligned with the organization’s current and future goals. This results in a more efficient allocation of resources by prioritizing current needs over past expenditure patterns, ultimately enhancing accountability and financial discipline within the organization.

When a budget is built from zero, it encourages critical thinking and a thorough analysis of the necessity and impact of each expense, leading to more informed decision-making regarding budget allocations.