During the preparation of a budget, what should be established?

Establishing preliminary budget priorities during the preparation of a budget is essential because it allows an organization to focus its financial resources on the most critical areas. By identifying what is most important, organizations can allocate funds effectively, ensuring that the highest priorities are funded first. This process also helps in setting a framework for future budget discussions and adjustments.

When preliminary priorities are established, it provides a strategic direction for the budgeting process. It helps in avoiding unnecessary spending in areas that may not align with the organization’s immediate goals or objectives. Additionally, it supports a transparent budgeting process, where stakeholders understand what the organization's focus areas are.

While future revenue sources, annual financial reports, and long-term financial goals are important aspects of financial planning, they serve different purposes and come into play at different stages of budget preparation. Future revenue sources help in anticipating income, annual financial reports summarize past performance, and long-term financial goals guide overall strategy. However, without clear preliminary budget priorities, it would be challenging to make effective decisions about how to use the projected revenue and align with long-term financial objectives.