The CPA's new role as data analyst

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July 13, 2021 by
The CPA's new role as data analyst
Solutions EXIA inc., Benoit Girard


Budget planning: top-down, bottom-up or hybrid strategy?  Deciding on a strategy for the efficient execution of the budget process is an important part of any organization.  Find out about two commonly adopted methods and how to choose the one best suited to your context.

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The challenges

Today, there are many different approaches to the budget planning process. Top-down, bottom-up and hybrid strategies are the most popular. But what are the advantages and disadvantages of each, and which is the best strategy for your business?

The traditional bottom-up approach

The "Bottom-Up" approach, the most common among our customers, is to break down budget items to the lowest desired level of detail, so that department managers can then produce a detailed budget for each of them.  This makes it possible to manage exceptions arising from the inherent complexity of operations, e.g. seasonality, or interdependencies between items.

The disadvantage of this approach is that it does not immediately provide a global view of the budget, and requires a series of back-and-forth operations between detailed data entry and global validation to ensure that the aggregated budget is in line with management's expectations.  Several cycles of adjustments may then be necessary, and if the mechanism for consolidating detailed budgets involves manual operations (loading multiple Excel files into an ERP system, for example), this considerably slows down the production of the final budget.  The Bottom-Up approach also tends to create an overall budget with higher expenses than other approaches.

The rapid top-down approach

The "Top-Down" approach places the greatest emphasis on aligning budgets with the organization's strategic priorities.  It consists of defining at a high level the broad outlines of the future state of revenues and expenses by business line.  The process begins with the Executive Committee, and then percolates through the organization, with predefined amounts allocated to departments and business lines.  The latter are then responsible for producing a detailed budget respecting the constraints imposed by the corporate budgetary vision.

The disadvantage of this approach is that certain subtleties of operational reality, which are not apparent at a high level, may not be compatible with the budgetary constraints imposed. This results in a considerable loss of efficiency when preparing the detailed budget. Indeed, the entry of certain values in a budget item may affect others, forcing several complex adjustment cycles in order to bring the detailed budget into line with imposed constraints and management expectations.

The hybrid realist approach

Une option plus flexible est celle d’une approche hybride, qui combine les avantages offerts par le « Bottom-Up » et le « Top-Down ».  Il est alors possible d’imposer des contraintes top-down sur certains des postes budgétaires clés, tels la main d’œuvre ou les dépenses de services partagés.  La saisie du budget sur les autres postes budgétaires étant alors établie avec l’approche « Bottom-Up » qui permet une meilleure gestion détaillée des cas d’exceptions.  

This approach, while interesting on the face of it, presents two major challenges:

  1. Its effectiveness depends on the judicious choice of items to be budgeted and the method to be used.
  2. The increased coordination required of those in charge, and the definition of a process in clear, carefully controlled stages.

Each of these approaches may be an acceptable choice, depending on the organization's operational constraints, the maturity of the Finance team and the level of process automation. However, the technological aspect should not be overlooked, since its judicious use has the impact of minimizing manual operations and consequently the risk of errors. Having the right tools can save time, increase efficiency, enhance flexibility and improve quality. Do yours really meet your expectations?


We have shown the different approaches possible for the budget planning process, outlining the advantages and disadvantages of each.  Our Swift Finance solution adapts to all these approaches, and enables the budgeting process to be completed efficiently.

  Learn about Swift Finance

The CPA's new role as data analyst
Solutions EXIA inc., Benoit Girard July 13, 2021
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