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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Depends on the Company. In corporations that use Zero Based Budgeting what you spent last year or what remained in your budget is irrelevant. You have to completely rejustify your budget every year. It’s definitely way more work than just carrying over the previous budget but discourages the above notion where departments want to fully spend the previous budget In order to keep that same amount the following year.
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