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DTux5249 t1_j2e997t wrote

>why do such policy exist?

To justify funding; If they don't use it all, then next budget isn't going to assume they need it, which may not be the case.

This is also the case if the business is in any type of program that relies on their requirements. If they spend less, they might get less next FY

>Isn't it better to carry over unused expenses to the next FY?

Not necessarily.

From an economical point of view, money sitting in a bank account is wasted potential. It should either be spent on making the company better, or paid to shareholders. Otherwise, it's rapidly losing value due to inflation.

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Leftblankthistime t1_j2ev98v wrote

Not entirely true that it’s losing money due to inflation. Companies to keep cash on hand and market investments for a variety of reasons. Airlines and logistics shipping companies for example tend to trade heavily on oil futures since one of their overhead costs is fuel. If they own a good part of the market, when their operating expenses go up because of inflation, so do the value of their investments which can either offset or even reduce the overhead substantially. Professional services companies similarly diversify in the types of companies they do business with so when one market sector is slow, others can pick up the slack. Having money on hand can help work as a reservoir to buffer the slower sectors at the same time.

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