Top-Down Budgeting

Top-down budgeting is a financial planning approach where senior management sets overall budget targets for the entire organization based on strategic goals. These targets are then broken down into departmental or project budgets by managers, who allocate resources according to these predetermined limits. This method ensures alignment with organizational priorities and simplifies the process, but it requires clear communication and trust to ensure departments effectively interpret and implement the budget constraints. It contrasts with bottom-up budgeting, where each department creates its own detailed budget that is then aggregated.