Budgeting

Turning budgets bottom up
Budgeting has traditionally been a top-down process. Corporate headquarters creates high-level budgets and then allocates them down through the organization to the stores. Unfortunately, they never reflect reality at the store level.

Down or Up?
The difference between top down and bottom up budgeting is accuracy and relevancy.

Why? Because the metrics used for this budgeting, like sales per associate hour or labor costs as a percentage of sales, do not reflect the demographics, actual product movement, price changes and other labor cost-drivers at each store. Therefore, there is little correlation between corporate budgets and store performance.

RedPrairie Budgeting turns this process around by leveraging forecasting models and engineered standards used in the store forecasting process to budget from the bottom up. The system accurately calculates sales and labor plans by store, or can import sales plans to generate labor needs. It can also create “what if” scenarios to evaluate the impact of corporate initiatives on short and long-term labor requirements.

This bottom up approach to budgeting provides significantly more accurate and meaningful store budgets, which when aggregated up through the organization, yield budget plans that can more appropriately be used to measure true store performance.