What is budget and how is it used?
A budget is an estimation of revenue and expenses over a specified future period of time and is utilized by governments, businesses, and individuals. A budget is basically a financial plan for a defined period, normally a year that is known to greatly enhance the success of any financial undertaking.
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.
What is budgeting of a project?
A project budget is the total sum of money allocated for the particular purpose of the project for a specific period of time. The goal of budget management is to control project costs within the approved budget and deliver the expected project goals.
The main advantage of bottom up budgeting is that it is usually very accurate. Individuals in each department are best placed to understand their costs, resources, expenses and requirements.
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.
In bottom-up investing concentration is on business-by-business or sector-by-sector fundamentals. This analysis seeks to identify profitable opportunities through the idiosyncrasies of a company’s attributes and its valuations in comparison to the market.
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.