> Giant companies are giant. It is difficult to give each group/department/division its own rules, so they prefer one-size-fits-all approaches, even if they are more inefficient individually.

The myth of Procrustes was he welcomed all travellers to spend a night in his bed for free; however, if you were too short, you were stretched to fit it the bed, and if too tall, some of you got lopped off. We use the same Procrustean 'one-size-fits-all' approach in many places in the modern world, from grade school, to government policies, to goddam 'one-size' socks that are either too short or too loose. I suggest it's an artifact of the mechanical age, which we are in the process of leaving behind.

The assembly line that so tremendously increased material production was based on identical parts, assembled in an identical manner, to create identical products. Our new computer-controlled systems have the potential to create unique parts, uniquely assembled, to deliver a unique product to you. (No, we're not there yet) We may be leaving the Procrustean model behind.

I worked as a data analyst. I remember 'strategic planning' in 1980 - using 6 to 12 month old data to predict where you were going to be in five years, and what you should be doing to get there. Now we have real time data available, and the computing power to process it instantly. Presumably, the greater flexibility of this process will filter down to the budgeting system, but that will probably take the retirement of the Boomer generation, who are still stuck in the Procrustean paradigm.

Storing money in a coffer isn't an inherent good. You should either be improving the company with that cash or returning it to shareholders.

If you let cash pile up the business with either issue a dividend, share buyback or make an acquisition, etc.

Kind of off topic, but I have a set of good friends that does exactly this. They live very nearly paycheck to paycheck, and if a windfall comes their way it is immediately spent. An uncle died an left them around $20k and they immediately upgraded their vehicle.

For a while this struck me as absolute madness, but I found out they didn't like the situation either. They get food stamps and other assistance and if their savings goes above a certain (very low) point they no longer qualify.

So if they saved $500/month, which they could, in 4 months time they wouldn't qualify for aid any more and would eat through those savings in a very short time and have to reapply for aid. And the time it takes to jump through the necessary hoops means they miss a rent payment, or have to skip on groceries, or whatever other unfortunate choice.

The system is set up to keep people trapped in it, not to help people become more productive and escape it.

Businesses are not families, and I know lots of families that do spend their budgets like that. In fact my wife and I realized that we came in $5000 under our annual budget and are looking at things we could buy that would improve our life that we didn't think we could afford earlier.

Companies generally already have cash stores, but cash sitting is cash wasted. Cash can and should be invested, either back in the company, or elsewhere, used to pay down debt, or used to pay shareholders.

So if your budget is reduced because you didn't spend it. That money will not just sit for a rainy day, it will be transferred to another place where it can do work for the business.

A last example. Microsoft purchased Minecraft, because it had too much cash in the bank, and the interest return on that cash was less than they would get by buying Minecraft, so they did.

Different way of looking at it. Budgets are more like setting enterprise or department-wide financial targets.

If you want something more comparable between a company's spending and a family's budget (where they account for every dollar), look at the Statement of Cash Flow. Money comes in from operations (work), some comes in through financing (loans), some goes out the door when you buy new assets to make more money later on (car) then whatever is left over can get put into retained earnings (savings).

You would hate to hear about how the government does the same thing with our "tax dollars".

We regularly get calls from govt organizations that have budget for equipment. As an example, let's say they budgeted for $2000 for a laptop. I ask, what do you need to do with that laptop?

The answer is generally browse the web and check email, write documents.

I explain they can do that with a $750 laptop, so if they have $2000 budgeted, we can get 2 for them.

That's not acceptable, they need to spend that money on 1 laptop so when they show their inventory and assets report, there's no extra equipment.

So, they get a $2000 laptop.

It's maddening.