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Top-Down Budgeting: Definition, Process & Advantages

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Instructor: Carol Woods

Carol has taught college Finance, Accounting, Management and Business courses and has a MBA in Finance.

In top-down budgeting, a company's high-level targets and goals are defined by senior management, and then managers are given an allocation from those targets. In this lesson, we'll discuss why companies use this method and how the process works.

We also recommend watching Budget Controls: Top-Down, Bottom-Up, Zero-Based & Flexible Budgeting and Attention and Top-Down vs. Bottom-Up Processing

What Is Top-Down Budgeting?

Top-down budgeting is a budgeting method in which senior management develops a high-level budget for the company. Once the top-level numbers are created, amounts are allocated to individual functions or departments that must create a detailed budget with their allocation.

Process For Top-Down Budgeting

Let's say you are a manager in an organization that follows a top-down budgeting process. Here's how the process would work from your point of view:

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