Creating and Managing a Top Down Budget

A top-down budget is one in which a fixed pot of money has been given to you for a project and you are expected to dole it out as you see fit. Usually this kind of doling out represents the fact that the company needs to make a particular profit on the implementation of the system and that any more money spent would represent diminished profit opportunity.

You' l l have to spend some time figuring out how to appropriately allocate the money given to you, because certain tasks that must happen might have less funding than they should actually have been given. For example, perhaps you have to buy two servers out of your $100,000 budget, but the servers you really need cost $20,000 apiece. You find that you cannot afford the servers you need and accomplish the other tasks as well, so you have to find ways to cut down on expenses while somehow meeting the goals and objectives of the project. You may, for example, buy a non-Tier One vendor' s server instead of the top brand, thus saving money but introducing a little sketchiness regarding the server' s capabilities.

So it comes down again to the battle among the three constraints: time, budget, and quality. In a top-down budget, the chief constraint is budget. However, management might make it clear as well that you have to have a set of deliverables in a certain time frame. (Nothing like making it tough on a person, eh?) With such a situation, you intuitively realize that the quality of the deliverable is the thing that ' s going to suffer. Apart from really well- implemented quality control methods, there' s no way you can avoid producing an output of lesser quality than you might've wanted.

With a top-down budget, you would still preface your budgeting process with cost-estimating procedures, but realize that your cost estimates must be tailored to fit a fixed total. You'll accomplish this with assumptions. In other words, the boss comes to you with a project. It's up to you to first of all roughly figure out the requirements, so you have a basic idea of what's required, then assume some things about the project: it will require some development work, new servers, whatever. Next refine the requirements and get the actual cost- and time-estimate figures for the deliverables. Figure 9.1 shows what a very basic top-down budget might look like.

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Figure 9.1: An elementary top-down budget spreadsheet

Figure 9.1: An elementary top-down budget spreadsheet

A top-down budget differs from a bottom-up in that an added step is required: You figure out whether you will meet or exceed the dollar figure given you and try to pare down accordingly so that your estimates match the dollar amount you have. The assumptions you make will help you get a working start in developing the budget.

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