Budgeting & Forecasting › The Budgeting Process

What is top-down (imposed) budgeting?

Beginner

Answer

Top-down or imposed budgeting is where senior management sets the budget targets and passes them down to lower levels with little participation. It's fast, aligns tightly with strategy, and avoids budget padding, but can demotivate managers and may be unrealistic because it lacks operational input.
Real-world example Head office imposes a 10% cost-reduction target on each division without consultation.

Common follow-ups: What are the drawbacks of imposed budgets? | When is top-down appropriate?