Budgeting, something that helps to hold business finances together, very obviously play a great purpose everywhere. From family budgets to Government budgets, its a widely used tool. In the context of business management, the purpose of budgeting includes to serve the purpose of firstly forecasting. It helps to forecast the income and expenditure. In the starting of business when plans are laid out its essential to predict the future expenses so as to bring efficiency, and thereby also calculating the estimated profitability.
It is also a tool for decision making, it helps a business to make decision on the current prediction done for the rest of the year or quarter, it gives them a blueprint of what they are going to encounter and how they are going to handle it.
Lastly, it serves as a means to monitor business performance. By estimating the expected expenditure and income, a business can check at the end of the year its actual expenditures and income and then compare both to understand what went wrong or right, and by how much percentage it has performed better or worse.