What is the main purpose of budgeting in financial management?

The main purpose of budgeting in financial management is to achieve specific financial goals. Budgeting involves creating a plan that outlines expected revenues and expenses over a given period, allowing individuals and organizations to allocate resources effectively to meet their short-term and long-term financial objectives. By setting financial targets and monitoring performance against those targets, budgeting helps ensure that funds are used efficiently and can guide decision-making to align with strategic priorities.

While tracking daily expenses, controlling taxes, and evaluating investment opportunities are important aspects of financial management, they are more specific functions that can be supported by a budget rather than the overarching purpose. A budget serves as a foundational tool that drives the overall financial strategy towards achieving broader goals such as profitability, sustainability, and growth.