Zero-based budgeting is a technique where a company’s budget is determined based on a forecast of expenses. However, unlike most other budget processes, previous year data is not used as a reference for future needs. The budget is to be derived only from what costs should be. Batarla (2005) notes that this “technique will help you better develop a complete picture of what the program actually needs to cost and not just what it has been costing” (para. 5).
Performance-based budgeting is concerned not only with the development of the actual budget, but also attempting to find the most effective ways to use money to get a desired outcome. Batarla (2005) states that this form of budgeting requires that “you throw out the notion of accomplishing programs (i.e. police department) and focus on how you can accomplish the outcomes (i.e. reducing crime)” (para. 7). Performance-based budgeting is a technique to help find creative ideas to solve problems by focusing on the expected outcome.
Batarla, R. (2005, September). Playbook: Add value to your budgeting process. Parks & Recreation, 40(9), 18.