215918
Beschreibung
Mindmap von Shahid Musthafa, aktualisiert more than 1 year ago
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Erstellt von Shahid Musthafa
vor etwa 11 Jahre
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Top down v/s
Bottom up
budgeting
- Top down Budgeting
- A budget planning strategy where cost estimates are
generated by working from the highest level
downwards. In top-down budgeting, a cost is typically
put on each unit of raw materials, services or labor
required for the project, and the estimated number of
units is then converted into a monetary sum to produce
the overall cost estimate to be used by the business.
Opposite of bottom-up budgeting.
- A top down budget is a budget that is set without
allowing the ultimate budget holder to have the
opportunity to participate in the budgeting process.
- A top down budget is a budget that is set without
allowing the ultimate budget holder to have the
opportunity to participate in the budgeting process.
- A budget planning strategy where cost estimates are
generated by working from the highest level
downwards. In top-down budgeting, a cost is typically
put on each unit of raw materials, services or labor
required for the project, and the estimated number of
units is then converted into a monetary sum to produce
the overall cost estimate to be used by the business.
Opposite of bottom-up budgeting.
- Bottom up budgeting /
Participative
- A bottom up budget is a system of
budgeting in which budget holders
have the opportunity to participate in
setting their own budgets. Also called
participative budgeting.
- Advantages
- Increased
motivation due to
ownership of the
budget
- Should contain better information since
employees most familiar with the
department set the budget thus the budget
will be more technical and accurate
- Increases manager's understanding
and commitment.The line managers
can improve thier budgeting and
visionary skills
- Better communication and
coordination between
departments thus it will lead
to a sense of teamwork
- saves time of high level
executives so that Senior
managers can concentrate
on strategy and other
productive functions
- Increased
motivation due to
ownership of the
budget
- Disadvantages
- Senior managers
may resent loss of
control
- Dysfunctional behaviour:
budgets may not be in line with
corporate objectives as
managers lack a strategic
perspective and will focus on
divisional performance
- May lead Bad
decisions from
inexperienced
managers
- Operational managers may not have
the knowledge and experience to set
a budget. For example, in a small
business only the owner may be
involved in all aspects of the business
and may therefore set the budget.
- Operational managers may not have
the knowledge and experience to set
a budget. For example, in a small
business only the owner may be
involved in all aspects of the business
and may therefore set the budget.
- Budget preparation
is slow and disputes
can arise
- In times of crisis there may be
insufficient time to set a
participative budget and targets
may have to be imposed to
ensure survival.
- Pseudoparticipation, where senior
managers seek the opinions of the
ultimate budget holders but do not act on
these views, may lead to demotivation.
- In times of crisis there may be
insufficient time to set a
participative budget and targets
may have to be imposed to
ensure survival.
- high possibility of Budgetary
slack: managers set targets
that are too easy to achieve.
- Senior managers
may resent loss of
control
- A bottom up budget is a system of
budgeting in which budget holders
have the opportunity to participate in
setting their own budgets. Also called
participative budgeting.
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