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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As a cost accountant who set annual budgets for 15 years, it is because we take the money away if you dont spend it. We are usually trying to account for increased supply costs of 3-5%, plus some random budget decrease upper managemnet pulled out if their butts, so uf you have a surplus, we will yank it so fast it will make your head spin.
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