Controlling Expenses via Budgeting

Many managers make the mistake of tracking expenses in a manner that negates any responsbility for managing them.

One example is office supplies. Suppose your annual expenses are $12,000. Would you rather A) Divide the expense among six departments or B) Assign one person responsibility for managing this expense.

The correct answer is B. Why? People are more likely to actively manage large expenses ($12,000) than smaller ones ($2,000).

As a general rule you should not have a General Ledger Account for any expense with a project yearly expense of less than $1000.