What is the main purpose of a budget in business?

The primary purpose of a budget in business is to outline expected revenues and expenditures. This financial plan serves as a roadmap for the organization, helping management allocate resources efficiently. By outlining anticipated income and expenses, a budget enables businesses to forecast their financial performance, make informed decisions, monitor progress, and adjust strategies as necessary.

In doing so, it also helps identify potential shortfalls or surpluses, guiding firms in managing cash flow and ensuring financial stability. This structured approach to managing money encourages discipline in spending and aids in achieving long-term financial goals.

While predicting market trends, managing human resources, and dictating employee salaries are important components of business operations, they are not the central focus of a budget. These aspects can be influenced by budgetary considerations, but they do not capture the fundamental role that a budget plays in financial planning and control.