The bottom-up approach ensures that all staff are involved in the preparation of the budget, which means they will work harder to achieve the budget than they would if it were just handed down by management using a top-down approach.
Bottom up budgeting is a form of financial budgeting where a company allows each department to set their own budget. … Once agreed, these separate budgets are added together to form the company’s overall budget.
Successful companies use this approach because lower-level employees tend to know more about their functional areas than upper management, providing for more accurate budget information. Also, employee involvement in the budget process increases the likelihood employees will accept the budget.
Question: What is a disadvantage of the “bottoms-up” approach to budgeting? O Lower level management is not apt to know as much about their specific area as upper management who has a better view of the overall picture.
Bottom-up budgeting, sometimes referred to as participative budgeting because of the participation required at all levels, starts with a list of things individual departments want or plan to do, such as projects; assigns a cost to each project; and then totals up all the projects in each department to arrive at an …
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.
The bottom-up budgeting definition describes it as a budgeting method in which each department within an organization makes a list of things it needs and projects that it plans to embark on, then proceeds to estimate the cost of each individual project.
The bottom-up budgeting process allows employees to own the process since they are familiar with the expenditures at the departmental levels. They will also be motivated to work hard since they feel that their input in the organization is valued by the management.
A bottom-up approach is a way of making corporate decisions that starts from the bottom of the hierarchy, rather than at the top. In practice, this means that the CEO or head of the department won’t be the one making all decisions (that’s called a top-down approach).
How does budgeting motivate staff?
Budgeting motivates managers and employees by providing useful yardsticks for evaluating performance. The budgeting process can have a good motivational impact by involving managers in the budgeting process and by providing incentives to managers to strive for and achieve the business’s goals and objectives.
Bottom-up promotional budgeting involves lower-level employees outlining their ideas for the wisest uses of funds, explaining their reasoning and having a discussion with management about available resources and expectations.
When an organization uses a top-down approach to budgeting?
Top-down budgeting creates one budget at a time, rather than allowing departments to develop their budgets and later combining them. As a result, the budgeting process will be less tedious, since senior management will formulate a single budget that the departments will follow.