Bottom up budgeting example

1. Identify all of the departments within a company.
2. Instruct each department to create a sum of cost projections.
3. Sum up the budgets of all departments.
4. Review individual department and total budgets.
5. Set final budget.

Bottom-up forecasting is a method of estimating a company’s future performance by starting with low-level company data and working “up” to revenue. Revenue (also referred to as Sales or Income). This approach starts with detailed customer or product information and then broadens up to revenue.

5 Most Common Budgeting Approaches and Their Pros & Cons

1. Incremental budgeting. Incremental budgeting computes a budget by applying adjustments to the preceding period’s actuals.
2. Zero-based Budgeting (ZBB)
3. Rolling (Continuous) Budgeting.
4. Activity-based Budgeting (ABB)
5. Performance-based Budgeting (PBB)

Bottom-up budgeting, sometimes referred to as participative budgeting because of the participation required at all levels, starts with a list of things individual departments want or plan to do, such as projects; assigns a cost to each project; and then totals up all the projects in each department to arrive at an …

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.

Four Main Types of Budgets/Budgeting Methods. There are four common types of budgets that companies use: (1) incremental, (2) activity-based, (3) value proposition, and (4) zero-based. These four budgeting methods each have their own advantages and disadvantages, which will be discussed in more detail in this guide.

With a bottom-up approach, the budgeting process starts in the individual departments, where managers create a budget and then send it upwards for approval. The proposed budget is then approved, revised or sent back for modifications.

The department-level budget estimates are summed up to get the overall organizational budget that is sent to the senior management for approval. The bottom-up budgeting process allows employees to own the process since they are familiar with the expenditures at the departmental levels.

Whet her you are creating a budget for your small business or a large corporation, there are two main approaches: the top-down approach and the bottom-up approach. Some companies and their employees swear by the top-down approach, but others believe the bottom-up approach provides the most advantageous view.

Develop your bottom-up estimate by doing the following: For each lowest-level work package, determine direct labor costs by multiplying the number of hours each person will work on it by the person’s hourly salary. You can estimate direct labor costs by using either of the following two definitions for salary: