Explain how budgets contribute to planning, control and motivation in an organisation

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Explain how budgets contribute to planning, control and motivation in an organisation

Budgeting is a way in which businesses plan for the future. They show how policies are to be carried out during that time period in order to meet the business objectives. Budgets not only help the business plan for the future they also motivate their employees and help manage the business. Jae K Shim and Joel G Sigel define budgeting as a 'financial plan to control future operations and results. It is expressed in numbers, such as pounds, hours and so on. Budgeting when used effectively is a technique resulting in systematic production management. Budgeting facilitates control, communication and also provides motivation to employees.'

Budgeting helps businesses decide where it wants to be at a future date and what policies they feel they should introduce to make sure they meet their objectives. Planning also helps the business anticipate any problems they could be faced with. By planning ahead they have provided enough time to prepare for these problems and can overcome them. For example, if the budget shows an increase in sales during a certain month like Christmas and the budget shows there's not enough