Having established the core financial objectives, often referred to as key performance indicators, the strategies to achieve them can be set in one of two main ways. The budgeting process can be:
'top-down' - i.e. set by senior managers and directed downwards, often based on previous results
‘bottom-up’ - i.e. evolving upwards from middle managers, through the use of detailed analysis, for confirmation by senior management.
In practice, at Zurich there are elements of both approaches. Senior management undertakes the topdown 'ambition setting'. This gives the strategic context. Managers then consider historical data, prevailing trends and any new drivers in order to formulate proposed budgets.
Zurich Business Partners help to ensure 'joined-up budgeting' between areas of the business:
Revenue centres generate income. They prepare sales budgets.
Cost centres generate expenses. They prepare operating or production budgets.
The profit budget draws together all the budgets for revenues and costs to meet overall financial objectives.