Bottom-Up Budgeting Beats Top-Down

Johan Smith

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In many organizations, budgeting season still feels like a game of telephone.

Finance builds a model, leadership sets targets, and somewhere along the line, budget holders are handed “their numbers”, numbers they had little input on, but which they are now expected to deliver. This classic top-down approach might be efficient on paper, but in practice, it often leads to misalignment, frustration, and missed opportunities.

There's a better way: activity-based, bottom-up budgeting.

The Problem With Top-Down Budgeting

Top-down budgeting is a legacy of command-and-control thinking. Senior leadership and finance teams decide what the targets should be and cascade those goals down to departments. It's simple, but also simplistic.

The problem? It assumes the people furthest from the action have the best view of what's happening. And that's rarely the case.

• It often overlooks the reality on the ground.
• It fails to consider nuances between teams, regions, or customer groups.
• It creates a sense of detachment: budget holders don't feel ownership, because they weren't involved.

At its worst, top-down budgeting becomes a one-sided exercise: leadership guessing, finance modelling, and the rest of the business trying to catch up.

The Case for Bottom-Up Budgeting

Bottom-up budgeting flips the process around. Instead of dictating numbers from above, it empowers budget holders (the people closest to operations) to build forecasts based on what they actually plan to do. It's also activity-based, meaning the budget isn't just a set of numbers, it's a reflection of planned actions and expected results.

Here's why that matters:

1. Greater Accuracy

When managers build their own budgets, based on real activities, assumptions, and costs, the result is a more realistic plan. Sales teams know their pipeline. Operations knows their constraints. Marketing knows which campaigns they'll run.

Each part of the budget is rooted in operational knowledge, not just financial estimates.

2. Increased Ownership and Accountability

When people are involved in building the numbers, they're more likely to stand behind them. That's because the budget becomes their plan, not just a target imposed from above.

Ownership leads to accountability as teams become more proactive in managing their numbers, tracking performance, and adjusting as needed. It stops being “finance's problem” and starts being a shared responsibility.

3. Better Insight Across the Business

Activity-based budgeting forces teams to articulate why they're spending, what they expect to achieve, and how that ties back to company goals. That kind of clarity is priceless.

It also gives leadership better visibility into what's driving the numbers, where the money's going, what it supports, and where the risks or opportunities lie.

4. More Agile, Strategic Planning

When budgets are built from the bottom up, it's easier to run scenarios, model changes, and adapt quickly. If you need to cut costs, you can see exactly which activities are affected. If you want to invest more, you know where that money will go and what it should deliver.

It turns budgeting into a tool for strategy, not just control.

How Technology Makes It Work

Of course, bottom-up budgeting can feel complex, especially in large or multi-entity organizations. That's where the right tools come in.

At XLReporting, we've built our platform specifically to support decentralised, activity-based budgeting. We enable every budget holder to input, track, and revise their numbers, while still giving finance full oversight and control.

• Custom workflows
• Input templates tailored to each department
• Clear audit trails and version control
• Real-time consolidation and reporting

You get the best of both worlds: local ownership and central insight.

Final Thought

Top-down budgeting may feel comfortable, but it no longer fits the pace or complexity of modern business. If you want engaged teams, reliable forecasts, and smarter decisions, it's time to build budgets from the ground up.

Give your people the tools (and the trust) to own their numbers. You'll be surprised what happens when the whole business gets involved in planning for success.

Curious how XLReporting can help you? Let's talk.

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Recent blogs:

Forecasting Income in the Healthcare Sector
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The Top 5 Pitfalls in Budgeting
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More from Johan Smith:

Forecasting Income in the Healthcare Sector
Forecasting Income for Non-Profit
The Top 5 Pitfalls in Budgeting
If You Break It, You Own It
When Control Becomes a Constraint

Back to the list