Running Head: BUDGETING 1

Budgeting

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March 25, 2021

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Budgeting

Top-down and bottom-up are two ways of analyzing and choosing inventories. However,

in several other industries, financial, investment, and economic sectors, the words are also

defined. Although the two regimes are familiar, many investors either misunderstand or fail to

grasp the various methods.

Top-Down Budgeting

In general, the top-down analysis relates to the use of comprehensive factors as a basis

for making decisions. The top-down strategy is to create a high budget for the whole

organization through the management committee. Upon these budgets being created, the sums

are assigned to each department, and the resulting budgets must then be drawn up under the

budget limits established at the department's supervisory level.[ CITATION Hut14 \l 1033 ]

Bottom-up budgeting

Bottom-up budgeting is often referred to as partial budgeting due to the involvement

needs at all levels, starting with a clear understanding of what different Agencies wish to do or

want to do, such as project costs for each project. A traditional strategy called top-down financial

management is where an entire company is formed and split into separate divisions and

components.

Advantages and disadvantages:

On the positive hand, this kind of budgeting is usually very exact due to the amount of

information expended in project scanning and the assignment of costs due to the high

involvement of different departments. Bottom-up budgeting is also desirable because the

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departmental leaders and the budget ownership have a means of defining their budget. Top-down

budgets save lower management time and resources, so the highest management team defines the

budget. That is better because it generates a budget and creates bottom-up spending taking

account of lower administration departmental needs. And inspiration for budget creation due to

ownership [ CITATION Saa15 \l 1033 ].

I prefer top-down budgeting because it saves time and goals that challenge us and help us

develop our skills. It begins with a certain number and allocates money and services to each

agency accordingly, leaving it to formulate new proposals or minimize current plans depending

on their resources.

References
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Hutchison-Krupat, J., & Kavadias, S. (2014). Strategic Resource Allocation: Top-Down,

Bottom-Up, and the Value of Strategic Buckets. Management Science, 61(2), 391-412.

doi:10.1287/mnsc.2013.1861

Saari, E., Toivonen, M., & Lehtonen, M. (2015). Making bottom-up and top-down processes

meet in public innovation. Creativity and Innovation in Services, 35(6), 325-344.

doi:10.1080/02642069.2015.1003369