What essential aspect must be included in budget preparation?

In budget preparation, forecasting revenue is a crucial component because it provides an estimate of the funds expected to be generated during the budgetary period. Revenue forecasting involves analyzing historical data, market trends, and other economic indicators to predict future income. This projection forms the foundation upon which expenses, investments, and operational costs are determined; it helps ensure that the organization can meet its financial obligations and support planned activities.

Forecasting revenue allows decision-makers to establish realistic and achievable financial goals, ensuring that the budget aligns with the organization's strategic objectives. By accurately predicting incoming funds, an organization can effectively allocate resources, plan for growth, and prepare for potential shortfalls, making it an essential aspect of budget preparation.