In one sentenceA way of preparing the budget that starts every item from zero, so no amount is approved unless its need is justified again, not based on last year's figures.
Simply put
In the usual method you take last year's figures and add a percentage. In zero-based budgeting you ask about every item: why do we need it, and how much is enough?
It helps when you want to cut expenses or reorder priorities, but it takes more time and effort, so some apply it to selected departments or every few years.
Worked example
A contracting business's marketing department asked for 200,000 SAR, the same as last year, and was asked to justify every item from zero.
Justified digital ads80,000 SAR
Taking part in an exhibition40,000 SAR
Printed materials10,000 SAR
Approved budget80,000 + 40,000 + 10,000 = 130,000 SAR
Savings = 200,000 − 130,00070,000 SAR
Don't confuse it with
Rolling budgetA rolling budget is about when it is updated (month by month), while zero-based budgeting is about how each amount is justified.