What is bottom-up budgeting?

Answer 1

Bottom-up budgeting, also called participatory budgeting, is a somewhat modern approach to planning the use of a company's financial resources. Reserved for somewhat larger organizations, it differs from top-down budgeting where the high level executives make all of the decisions. Participatory budgeting provides the opportunity for employees to be involved in setting their own goals and expectations for a given financial period. It gives them ownership of the decisions, motivating them to meet budgetary constraints that otherwise might seem unattainable or unrealistic if they were delivered by someone without as much understanding of their day-to-day operations. Along with this increased participation, bottom-up budgeting also helps to create a more accurate picture of how much each department needs in order to function effectively. Of course, adjustments may need to be made for new hirings, special projects, and equipment replacement, but these can be communicated directly to the departments themselves before a budget is finalized. The important thing to remember when constructing any budget, whether it is bottom-up, top-down, or a mixture of the two, is that it be taken seriously at all levels of the organization. Though a budget alone cannot guarantee the success of any particular business, it can certainly prevent failure in most cases.