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Introduction to budgets - Coggle Diagram
Introduction to budgets
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The annual budget is then broken down into quarters (every 3 months) and then into the monthly budget.
not just prepared for the whole business, budgets are broken down into different divisions or locations or maybe even different teams.
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advatanges
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communication tool (understand what other parts of the business is doing and where the business is going as a whole)
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top-down method
typically begins with senior management. The goals, assumptions, and predicted revenue and expenses information are passed from the senior manager to middle managers, who further pass the information downward.
advantage: final anticipated costs are reduced by the vetting (fact checking and information gathering) process.
bottom-up method
After senior management has communicated the expected departmental goals, the departments then plans and predicts their sales and estimates the amount of resources needed to reach these goals
advantages: managers feel their work is valued and that knowledgeable individuals develop the budget with realistic numbers. Therefore, the budget is more likely to be attainable
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