Bottom-up vs. Top-down Budget Plans, 2010). The budget rules that are prepared by top management are passed down through successive levels within the company. Managers at each level may make additions and offer greater detail for their subordinates. The managers at each level prepare the plans for items under their control. The budgeting process will caution management of possible problems that may occur. By knowing the problems, solutions may be formulated. For example, at the valleys in cash flow, a shortage of cash may occur. Knowing this ahead of time allows management to arrange for a short-term loan for the financing need rather than face an unexpected financing crisis. In a similar element, planning allows for a smooth manufacturing program to result in both lower production costs and lower inventory levels. It steers clear of a crisis circumstances requiring overtime or high transportation charges in order to receive supplies ordered on a rush basis (How to Prepare A Sound Budget Process. Six Steps in the Budgeting Process. Bottom-up vs. Top-down Budget Plans, 2010).

Budgeting can be a very extensive process and not one that is always foolproof. Nevertheless, it is a process that must be carried out on a yearly basis so that a business can be successful. Those in management must train and prepare those under them to contribute to the budgeting process. Everyone in an organization must be aware of how much money there is to...

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http://www.businessknowledgesource.com/smallbusiness/how_to_recognize_potential_budgeting_problems_024003.html

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