The budget process and budgets themselves can impact management actions, both positively and negatively. A common practice among some organizations is to spend any amounts remaining in a budget before the end of the budget period. This practice is often called "use it or lose it." The view is that if a department doesn't spend the budgeted amount, management will reduce next year's budget by the amount not spent. To avoid losing dollars, department managers often spend the entire budget regardless of the value added to products an/or services. All of us pay the costs associated with this type of budget system.

How can we create a system whereby the "using up" the budget is not needed to ensure full funding in the following years?