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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My employers spend their life explaining that THAT’S NOT HOW IT WORKS.
Idiot companies operate such policies because the middle-managers want to constantly keep upping their budgets to look important, so they have constantly growing budgets, that nearly overrun all the time, to make it look like they don’t have enough. Then some idiot above them just approves more money.
The same kind of middle management is also after money on their own pet projects, so when you come in £10k under-budget on one thing, they will want to spent that £10k elsewhere on something they care about. You’ve now “lost” that £10k permanently. Thus the only way to combat such idiotic financial management is to always use up the budget each time so they can’t justify cutting it.
In any company with an ounce of common sense or financial management, that’s not how it works. Many of my employers over the last few decades have had to actually announce regularly that that’s just not how it works, because people come in from elsewhere with the natural *impression* that that’s how it works everywhere. It’s not true. And, unchecked, it will repeat even in workplaces that don’t practice such idiocy because of people expecting it to work like that.
I manage several budgets in the 6-figure ranges, I basically go out of my way to make them as cheap as possible without compromising on anything. It’s usually easy to do so, because there’s a lot of nonsense wastage like this everywhere I go. I sometimes do “deals” too – look, I will cut out this £10k piece of equipment that was budgeted, replace it with a £2k thing that does everything we need but, and this is important, I want £5k of that saving to go on that thing you denied the other day because we didn’t have any money for it. Agreed?
More often than not the employer gets what they need, they get a saving AND I get the thing that my department’s been after for years. I just started at a new workplace and have already done this twice.
Because they actually LIKE people who can cut their budget and say “Well, yes, I’m sure that’s a lovely piece of kit… but we don’t actually need that level of equipment, we can do everything we need to do with a cheaper version without compromising on time or quality.”
When I was self-employed many years ago, I would promise my clients that I would save them AT LEAST as much money as it cost them to pay me… and I always did so. Because there is just so much unnecessary wastage because of nonsense like this.
Budget-holders have a responsibility to have a low cost, but also to fulfil all their needs – present and future – from that cost. You also have a responsibility to know what’s necessary and what’s not because you hold the budget and therefore you should know… because the people above you DO NOT KNOW.
Padding your budget is fraud, as far as I’m concerned, and customers and even your colleagues are paying for that. Every penny wasted is more money that doesn’t end up in your pay packet, eventually. Even if that’s just in the form of “Hey, Jeff, you saved us £50k this year! Have a £500 bonus!”.
Places that operate like this often don’t know that it’s happening, don’t want it to happen, or limited to only a layer of middle-management that do it for their own status-symbol gain (e.g. saving money to then spend on vanity projects and sucking up to the boss). It’s partly the upper-management’s fault for not keeping it in check, but also they can’t micromanage every budget and have to trust budget-holders.
But nowhere where there’s any actual sense of budgetary control is it actually “official policy”.
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