Creating and Managing a BottomUp Budget

A bottom-up budget, on the other hand, assumes no top starting figure (though I can guarantee you there will be one). Instead, you appropriate your funds to cover each tasks requirements, whether capital items, expenses, or services. You use cost-estimating techniques to figure out how much each task you must perform will require. The top-down and bottom-up methods are a bit similar, but with bottom-up you have more leeway because you're not (yet) dealing with a fixed budget figure.

Figure 9.2 shows what a simple bottom-up budget might look like. Bottom-up uses the actual expenses you've already incurred along with the scheduled (or projected) expenses.

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Figure 9.2: An elementary bottom-up budget spreadsheet

Figure 9.2: An elementary bottom-up budget spreadsheet

You can see that I've formatted the sheet to show the conventional columns you might track. Note also that without the top-down budgetary constraint, the same project looks very different, at least in terms of cost. In this budget, you have the ability to assess costs a bit more liberally.

Table 9.2 describes the differences between the two budgeting styles.

Table 9.2: Differences between Top-Down and Bottom-Up Budgets

Feature

Top-Down

Bottom-Up

Unknown dollar amount at budget development time

No

Yes

Requires assuming that some resources will be available

Yes

No

Requires cost-estimating

Yes (but might involve more

"guesstimati ng" than estimating)

Yes

Must work within dollar figure given

Yes

No

Might have to pare down tasks and activities to meet the budget

Yes, but before

Yes, but after the

Table 9.2: Differences between Top-Down and Bottom-Up Budgets

Feature

Top-Down

Bottom-Up

developme nt of the budget

project budget has been approved

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