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Budgeting Introduction Business managers need to look ahead at what lies in the future. A budget is an agreed plan for future expenditure and income from sales based on the objectives of the business. A budget helps managers to measure whether they are achieving what they set out to achieve, if not they know to take action. Budgets also provide a way of allocating responsibility among employees. The main types of budget are: Sales budget a month by month breakdown of how many products the business aims to sell, and how much revenue it will get from those sales. Marketing budget describes how the business intends to achieve the budgeted sales (e.g. how much advertising, sales promotion). Production budget numbers to be produced and costs of production – used to help schedule work and order raw materials. Departmental budgets sets out how much each department can spend during a year. Cash flow budget – ties all the other budgets together – helps understand what money is coming in (sales) and what money is going out (production and departmental). A budget can play a role in motivating employees in the following way:- budgets provide a focus and a sense of achievement when it is reached. rewards in the form of bonuses can be linked to the achievement of budgets. |