Rakesh Pullabhatla
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Top Down Financial Planning

6/10/2014

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Please look at my previous post How to prepare the Budget / Operating Plan ? for creating Bottoms-up plan.

So what is top-down planning and why is it important ?

Top-down planning is for creating the 3-5 year plan. It does not involve every functional leader but only a few select in the management. It is important so we can fund long-term expenditures and raise capital accordingly. What are the steps ?

  1. Gather historicals and short-term plan
  2. Figure out what the management strategic guidance is
  3. Set up the plan accordingly
  4. Allocate to individual groups
  5. Iterate with feedback from functional leaders
  6. Finalize the Plan complete with Income Statement, Balance Sheet and Cash flow statement
P.S. :  You can also create short-term budgets using the top-down budgeting method. However, it is better to involve functional leaders to create better accountability.

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