Question

In at least 225 words answer the following: (Please cite any references used)

What is the difference between top-down and participative budgeting? Which method do you think is the most effective, and why?

Answer 1

In corporate budgeting, a top-down approach involves the senior management team developing a high-level budget for the entire organization. ... With a bottom-up approach, the process starts in the individual departments where managers create a budget and then send it upwards for approval.

Top Down Advantages: With top-down budgeting, only the executive team is involved and thus lower management does not have to take time to prepare the budget. This can represent significant time-savings for those who are more involved in the day-to-day rather than the overall strategy for the organization.

Bottom up Advantages: Usually the outcomes of this approach are increased ownership of the budget, more information since employees familiar with each department are creating the budget, and increased understanding, communication and commitment on behalf of managers because they are directly involved in the process.

No matter the approach you take to corporate budgeting, be it a top-down or bottom-up, the True Sky Excel-based corporate performance management system can make it easier.