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Definition

Participative budgeting

Definition (1):

Participative budgeting is a budgetary approach that starts with input from lower-level managers and works upward so that managers at all levels participate.

Definition (2):

A budgeting process where the individuals who are in the lower management levels are engaged in the process of budget preparation is called participative budgeting.

Definition (3):

Participative budgeting refers to a process where individuals affected by a budget are directly or actively engaged in the process of budget creation.

This is a bottom-up budgeting approach tending to generate more attainable budgets than top-down budgets, imposed by senior management on a company, having lesser employee participation. This approach is also suitable for morale and can result in more efforts by employees for achieving what they assumed in the budget. Completely participatory budgeting does not consider high-level strategic views, so management requires to give employees guidelines about the company’s overall directional plans and the way their different departments match with it.

This budgeting takes a longer time to generate a budget than in the case of a top-down budget that is generated by a much fewer number of people. The related labor cost with generating such a budget is also higher.

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