One discipline applied to costs by high performing organisations is known as “Zero-based Budgeting”.

Zero-based Budgets are built from the ground up each year instead of taking last year’s budget as a starting point. Start from the ground up instead of adding a little or taking a little away.

Cost Centre Managers – Zero Based Budget

The Managers of each Cost Centre have to demonstrate why the costs in the Zero Based Budget are necessary.

Preferably do this on an annual basis, but if not, do it as a once off as part of this Profit maximisation exercise.

When cutting costs, you will get push-back from the Cost Centre Managers saying:

It is much better to cut heavily and then restore anything that you have cut that proves to be a necessity.
The Zero Based Budget will indicate these.

The only instance where you might think otherwise is in relation to making staff redundant.

One way to impose a cost saving discipline on your staff is to require that any expenditure of more than a certain amount (and make it a small amount) must be approved by you.

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