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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Not a company but as a property manager my annual operating budget is a little over $16 million. I can be within 3% under that, but not a dime over.
I plan my budget 5 years at a time, and constantly re-adjust and re-forecast throughout the year.
Most spending is relatively easy to plan for like payroll and maintenance. Utilities are sometimes a crapshoot, as a really warm winter can leave us with hundreds of thousands in unspent cash.
Luckily I have the opportunity to re-forecast during the year, and either ask for more money or give money back that I know I won’t need. I only can do this until November however, and then must make do with what I have until March 31st.
Typically by January I’ll have a pretty good idea exactly where I’m going to end up by end of March, and it’s not uncommon to have a period of “frivolous” spending to burn the extra cash. So usually throughout the year we will keep lists of potential projects or big purchases that we don’t really NEED but would be nice to have, and so we always have a few big money pits we can use in a pinch.
I guess the short answer is a cycle of planning and re-forecasting combined with being prepared to spend like crazy.
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