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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There is a team called FP&A or financial planning and analysis. This is literally their job. Some expenses are monitored daily while the others are monitored monthly / quarterly.
I must say that quite frequently they go over / under budget. Typically companies have extra cash to cover for this. They also have a proper approval mechanism for any over budget expense. This mechanism has to be followed before making the over budget expense.
Being under budget by 1-5% is good performance. Over budget is also acceptable if you can provide a business justification like unforeseen expenditure or new business initiative etc.
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