So most companies have a big corporate office and a bunch of regional offices that they allocate money to, I get that. Let’s say a given office gets a $500,000/yr operating budget (just throwing out a random number). How do they spend exactly $500,000? Because they obviously don’t want to go over budget but they don’t want to have a surplus and lose $ next year. So is there wiggle room? Would they spend $499,995 or something?
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If you’re familiar enough with your needs, you can guess accurately enough that sticking to a budget is “simple” aside from unforeseen circumstances.
Think about your own food budget. If you looked at the last year of grocery bills and determine that you spend about $200 a week – how hard would it be to stick to a $10k food budget annually? Not too hard, you’d incidentally end up around there anyway even if you weren’t paying attention. Then, at the end of one month you see you were a hundred over – you try to spent $100 less the next month to stay on track.
At the end of the year, if you have a few hundred left over – maybe you splurge on expensive items you don’t really need but may want.
A company can do something similar, and tracks specific spend through a combination of purchase order, invoice, and receipt documents. PO says “I want to, and am approved to, buy x,” invoice says “a supplier is giving me x,” and receipts say “I received x.”
Depending on how an org budgets – if a team has more money left, they burn it. I’m a consultant, and from October to eoy, I get clients just because they have cash and would lose it if they didn’t use it.
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