When to Use Bottom Up Budgeting

There are a number of ways that you can budget for your business, and not every way works for every business. Bottom up budgeting is one way that you can increase the engagement within your organization so your budget is more cohesive and accepted by more within the organization.

But it’s important to note that every organization is different which means that when you choose the method of budgeting that works best for you, you need to do it because it fits. Not because you think you should.

What is Bottom Up Budgeting?

Bottom up budgeting is a budget style that helps to ensure each department gets the funding they need and want. 

It’s a great style of budgeting to use (if you have everyone’s proper participation) because it gets the different departments to plan ahead and think about what they want to do during the selected time period.

Do they need to hire someone else? Is there a project they’d like or need to do to make things run better? It gets them to look ahead at what the schedule for the upcoming time period looks like. 

Pros

The biggest pro to bottom up budgeting in my mind is the fact that there’s increased ownership from the different ranks. They’re telling you what they need and how they’re going to spend it, which means there’s likely a higher satisfaction in what they receive.

Directly involving department managers in the budgeting process can also help instill a greater understanding and communication because they’re involved. And having to rework the budget if it doesn’t fit could also go over better simply because of that increased discussion. 

Cons

There’s a really big downside to bottom up budgeting—for all of the value that it provides, it often results in more spending. It might also see budgets that are not in-line with the overall corporate objectives.

All-in-all, when using bottom up budgeting, you’ll need to ensure that once you have everyone’s desired budget you take some time to ensure that it lines up with the organization’s overall objectives. And ensure that there’s enough money to go around!

When to Use Bottom Up Budgeting

Bottom up budgeting is definitely best for larger businesses where the major decision makers might not be as involved with the day-to-day operations of the different departments. It can be hard to make decisions for the budget of the overall operations when you aren’t sure what each group is doing to meet the overall goals.

When it comes to running a larger organization, the bottom up approach can help with greater buy-in. It’s no surprise that a lot of times when budgeting is done, different departments end up unsatisfied and disappointed, and this style might be able to help out. 

But a bottom up style is likely less useful in organizations that are smaller. If you’re involved in the day-to-day of most of the business, it’s much easier to set realistic budgets. Even if you aren’t directly managing all of them.

Do you use bottom up budgeting? Share your tips and tricks in the comments below!

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