In many companies, there’s this policy which requires awarded budget that must be spent completely once it’s approved. If the annual spend is below the allocated annual amount, there’s a chance next FY you won’t get the requested budget you asked for.
– why do such policy exist?
Isn’t it better to carry over unused expenses to the next FY? Saving expenses expenditure is a bad thing? Such a policy encourages employees to spend extravagantly the remainder amount nearer to FY-end.
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If you start the year with an allocated budget, you are careful to make it last to cover emergencies and essentials. When you have limited time before the next budget arrives you can switch to the ‘nice to haves to increase productivity/replace before they fail’ it’s basic common sense not rocket science. It is a tried and tested approach that works. Underspending is a recipe for future unexpected expenditure.
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