Top-down and Down-up Budgeting
Can we suggest to make the budget integrally?
The term ‘budget integration’ refers to the blending together of the top-down approach and the bottom-up approach to Budgeting. When preparing a company budget, using the integrated approach is always recommended. Although the two models represent opposing strategies, they are similar in the manner a company plans its budget (Kim & Park, 2006). To achieve the maximum benefits of both models, it is recommended that accountants and other budgeting personnel combine the two approaches.
Making a budget integrally has various advantages:
- It provides adequate information on the proposed financial framework, which supports a company to the timely implementation of the solid strategic plan(Kim & Park, 2006).
- Presents resources requirements for information, approval, and appropriation. Typically, a company’s budget has to include all the required information before approval by the budget committee(Hutchison-Krupat & Stylianos, 2015). Thus, an integrated budget allows the appropriation of the right budget that matches the specific purpose of the ongoing programme.
- An integrated budget brings about effectiveness. According to (Kim & Park, 2006), making the budget integrally allows the company to uphold resources balances, opening, and closing. Also, the projected income resources are integrated. Besides, an integrated budget provides for a planned utilization of company resources by cost classification and avoiding unnecessary costs when funding a specified project.
On whether these two budgeting models can be together blended, I believe yes. Having a blend of top-down and down-up budgeting approaches would improve a company’s strategic planning and forecasting (Hutchison-Krupat & Stylianos, 2015). In forecasting, the identification of key value drivers for the budget would be easy if these two are blend. Besides, budget performance would easily be measured through the two models’ indicators.
References
Hutchison-Krupat, J. & Stylianos, K., 2015. Strategic resource allocation: Top-down, bottom-up, and the value of strategic buckets. Management Science, 61(2), pp. 391-412.
Kim, J. M. & Park, C. K., 2006. Top-down Budgeting as a tool for central resource management. Journal on Budgeting, 6(1), pp. 87-125.