The Budgeting Process

Many traditional companies use top-down budgeting, a process of developing budgets in which top management outlines the overall figures and middle and lower-lever managers plan accordingly. The top-down process has certain advantages: top managers have comprehensive knowledge of the organization and its environment, including their familiarity with the company's goals, strategic plans, and overall resources availability. Thus, the top-down process enables managers set budget targets for each department to meet the needs of overall company revenues and expenditures.

Other organizations use bottom-up budgeting, a process developing budgets in which lower-level and middle managers anticipate their departments' resource needs, which are passed up the hierarchy and approved by top management. The bottom-up approach builds on the specialized knowledge of operating managers about environment and marketplace, which they have gleaned from day-to-day operations. In reality, the budgetary process usually involves a mixture of both styles.

Previous page Next page
Control Systems And Techniques
The information on this page may not be reproduced, republished or mirrored on another webpage or website.
Copyright 1998-2014