Question

As a manager in a business, you have to make many decisions on how budgeting takes place. If you had a choice in a company where you are a manager, would you use top down budgeting or bottom up budgeting? Explain why.

Answer 1

As a manager i would definitely go for Top-down budgeting because it is carried out by the senior managers who have better overall view of the organization and its resources ie. it involves the development of a budget for the entire organization .Once the top level numbers are created ,amounts are allocated for various department working in the organization.During top-down budgeting ,the organization considers the past and current market conditions,changes in tax legislation,profitability level of peers etc..all these together make top-down budgeting more effective than bottom-up budgeting ,ie where budgeting starts at the departmental level and moves to the higher level here we can see that bottom-up budgeting reqquires more time and attention because it passes through different levels, therefore it is better advised to adopt top-down budgeting because it saves more time and creates one budget at a time ,rather than allowing departments to develop their budgets and later combining them.from this we can easily conclude that top-down budgeting is preferable because it aims at better financial control and overall growth of the organization.