Carry forward unspent budgeted funds to a new period

Description

The feature of carrying forward unspent budgeted funds in Corporate Performance Management (CPM) software enables an organization to automatically transfer the unspent budget from one financial period to another.

Example Use Case

Scenario: A non-profit uses Microsoft Excel for financial planning and budgeting. Each year, some departments underspend their allocated budgets from unrestricted grants. Previously, these unspent funds would revert to the general fund, causing departments to rush to spend the money irresponsibly.

Solution: With the introduction of a CPM software feature to carry forward unspent budgeted funds, these remaining amounts are now automatically transferred to the department's budget for the next period. This not only improves budget accuracy but also incentivizes departments to adhere closely to their spending plans.

Considerations

This can be as simple as a system that rolls forward unspent funds into an account each time period, similar to rolling forward retained earnings on a balance sheet. This can require that the system allow a specific account to be planned at an annual level without the monthly breakback. Expenditures subtract from that value until it is either zero, or the leftover balance is pushed to the following year. This is complex with plenty of nuance, as such it will require a robust conversation with the vendor. Expect most vendors to not address this with standard functionality.

Questions to Ask a Vendor

• Automation Features: Can your system automatically carry forward unspent budgeted funds from one period to another?
• Transparency: How visible are the carried forward funds in the budget of the new period?
• Customization: How flexible is your system in terms of customizing the rules for carrying over budgets?