Learn how top-down budgeting and bottom-up planning differ. Get clear pros, cons, and tips so you can select the method for your team and goals.
Your budget isn’t just a set of numbers. It’s a way of seeing. How you build it, top-down, bottom-up, or somewhere in between, determines how your company makes decisions, allocates resources, and responds to change:
- Top-down budgeting starts with leaders setting clear targets that trickle down to departments.
- Bottom-up budgeting flips it—departments build detailed budgets from the ground up.
The model you pick shapes how quickly you adapt to change, how involved your teams feel, and how well your company stays on track. Many businesses use a hybrid budgeting model to get both strategic focus and on-the-ground detail.
The trick? Find the budget method that matches your company’s structure, culture, and goals. Let’s break down how each strategy works, the strengths and weaknesses, and how to pick what’s right for your team.
Why top down budgeting matters
Top-down budgeting puts your leadership in control. Senior management sets big-picture spending targets with strategy and growth in mind. Managers then work within those targets. This gives teams clear direction and ties planning to company goals.
It’s fast, strategic, and centralized. Leaders determine the budget each department can spend. Managers budget within those limits. Everyone rallies around the same priorities. There’s no drawn-out back-and-forth.
This method is all about control and consistency. When leadership owns the budget, it keeps spending focused and resources balanced. Every team works from the same plan, since there’s one source of truth.
But there are trade-offs:
- Top down budgeting keeps priorities clear, but it can miss detail. Managers might not have all the insights they need for detailed budgets.
- And when frontline teams aren’t involved in the numbers, buy-in suffers. Those who didn’t set their own targets can feel less invested, especially if the numbers don’t match daily realities.
Top-down budgeting works best when there’s clarity from the top. When you’re leading a big company that moves fast, has centralized decision-making, or has leadership with a clear vision. When you need every team rowing in the same direction, quickly.
How bottom-up budgeting compares
Bottom-up budgeting flips the script. It’s all about granular planning. Instead of leadership handing down targets, teams build detailed plans from the ground up. Finance rolls them up, aligns them, and turns them into a single, unified forecast.
This style favors accuracy and detail. Operational teams know their needs, so they can allocate resources precisely. Every expense is accounted for since teams closest to the work build the estimates.
Bottom-up budgeting also boosts engagement. When teams help plan their budgets, they’re more invested. That collaboration translates to stronger commitment.
This approach has its own challenges as well:
- Departments might build in “wiggle room,” which can push company-wide budgets up.
- The process is precise, but slower. It takes longer since finance teams gather and fit together many moving parts.
- And without strategic guardrails, department-level plans may drift from company goals.
Bottom-up budgeting fits teams with open, collaborative cultures and those growing businesses needing detailed plans and departmental involvement.
Choosing the right approach for your team
Your company’s structure and culture should shape your budgeting approach:
- Centralized leadership and tight strategic control? Top-down delivers consistency and speed.
- Collaborative culture that prioritizes team input and flexibility? Bottom-up delivers accuracy and buy-in.
- Need both? Combine them for a hybrid approach.
The most important thing isn’t which you choose. It’s how well the method matches your company’s structure, goals, and pace. And how willing you are to adjust as those things change.
Collaboration matters in every approach, of course. Sales and marketing teams need to connect on revenue targets and campaigns, no matter how you budget. The only difference—do you set targets from the top, or do teams build from the ground up?
Most teams don’t choose between top-down budgeting and bottom-up budgeting. They blend them. Leadership sets strategic targets—cash runway, hiring velocity, revenue goals. Teams fill in the details—specific roles, regional plans, campaign budgets. This keeps strategy and operations in sync.
In Runway, that blend is built-in.
- Headcount & Fundraising Planning: Mix top-down headcount targets with bottom-up requests in Runway to build investor-ready models.
- Fundraising Prep: Runway helps finance teams generate projections and reports for fundraising rounds.
- Scenario planning keeps both sides aligned when things change.
When both levels contribute, the plan becomes more than a spreadsheet. It becomes a shared map.
FAQs on budgeting approaches
1. What’s the key difference between top-down and bottom-up budgeting?
Top-down starts with leaders setting spending targets. Departments follow those guidelines. Bottom-up starts from the teams. Departments create detailed budgets that sum up into a company-wide plan. The real difference: who starts the process and where the detail happens.
Top-down delivers speed and strategic focus. Bottom-up shines with accuracy and engagement. Your pick depends on how much you value control versus input from your teams.
2. Which companies get the most from top-down?
Big companies with clear hierarchies and centralized decisions get the most from top-down. If you need to move fast, respond to rapid changes, or keep everyone aligned, top-down gives you an edge. Retail chains and companies with similar operations across locations use it for consistency everywhere.
3. What are the risks of bottom-up budgeting?
The biggest risk is budget drift. Teams might add padding for safety nets, which makes budgets balloon. More inputs mean a slower process. Bottom-up can also mean departments miss the company’s bigger strategy if they get too focused on their own needs.
4. How do I keep departments aligned with bottom-up?
Share your big-picture goals before budgeting starts. Hold regular check-ins across teams. Spot conflicts early.
A shared financial planning system is key. Runway gives everyone visibility into how department budgets roll into the bigger plan. Real-time updates and scenario planning keep every team on the same page.
5. Can I switch between top-down and bottom-up mid-year?
Yes. Switching mid-year is doable with the right tools. Runway’s flexible modeling lets you update plans, reallocate resources, and switch up processes without losing momentum.
The main thing: pick a platform that keeps your data stable and lets your team shift gears as needed.
Choose the model that works for you, and keep it flexible
Top-down budgeting brings clarity and speed.
Bottom-up budgeting delivers accuracy and buy-in.
You don’t have to stick with one method forever. Many companies shift their budgeting as they grow. The secret is to use the right tools for every stage of your journey.
Best Practice – Cross-Functional Collaboration: Bring in key collaborators early and share dashboards to align teams.
Runway’s collaborative platform adapts to both approaches—top-down and bottom-up—and switch between them as needed. Because planning isn’t static. And your model shouldn’t be either.