A water budget needs to be prepared at the beginning of each season to estimate how much cotton can be grown with the available water. A water budget is part of risk management - that is, it helps to reduce the risk of not having enough water to finish a crop.
To prepare a water budget you need to know 1) your seasonal crop water requirements; 2) the climate and its variability; and 3) the available water supply. This fact sheet outlines the three areas in detail.