A budget is a forward looking tool to estimate cash in-flows, outflows, and balances of cash as it stands at various points in time. One of the greatest benefits of a budget is to detect possible future cash stringencies and make arrangements well ahead of a crisis. The sources of crises can be from both positive and negative factors. A positive crisis may be growth where a company makes sales in greater proportion than their cash-on-hand can support. A negative crisis may be declining or no revenue to satisfy operating expenses. In either case pre-planning benefits the company by causing less stress on everyone.
The quality of a budget says a lot about the management of an organization and their ability to perform well in a changing market. Budgeting is essential to the welfare of an enterprise because it is a tool to help a workforce, front-line employees and management, understand if they are achieving financial success. If yes -then good. If no then something needs to change. In general, a profitable business is an asset to society because it puts together raw materials, labor and management and converts them into something of greater value to society.
Budgeting is a good way to avoid losses by planning in advance.