GROUP PRESENTATION ON SALES BUDGET BY- Roll No. Name 13 Antriksh Bhatnagar 17 Rishabh Sharma 18 Sanjay Singh 19 Prateek Sharma
Meaning of Sales BudgetSales budgeting is a key function of salesmanagement. It involves estimating futurelevel of revenue and selling expenses, andconsequently the profit contribution made bythe sales function. The outcome of salesbudgeting is seen in the form of twodocuments:1.The sales budget, and2.The selling expenses budget.
•Sales Budget reflects the targetedsales revenue.• Sales Expense budget shows the expenses necessary to reach the targeted sales revenue. Through these two statements sales management can reconcile these revenues & expenses with the firm’s objectives. Thus, sales budgeting is concerned with improving selling efficiency & reducing the selling costs.
The sales budget is prepared bymultiplying the expected unit sales volumefor each product by its anticipated unitselling price.Each of the other budgets such asproduction budget, direct materialbudget, direct laborbudget, manufacturing overhead budget &Selling and administration budgetdepends on the sales budget.It is derived from the sales forecast. Itrepresents management’s best estimate ofsales revenue for the budget period.
Objectives of Sales Budget:- 1.Planning :-The company formulates marketing and sales objectives; the budget determines how these objectives will be met through a detailed breakdown of the sales budget among products, territories and customers. 2. Co-ordination:- The budget establishes what the cost of various heads b thereby maintaining a desired relationship between expenditure and revenues. The budget enables sales executives to coordinate expenses with sales. It also restricts the sales executives form spending more that their share of the funds helping to prevent expenses from getting out of control. 3. Control:- The sales budget enables sales executives for evaluating sales performance . A sales manager can improve his success by meeting sales and cost goals set forth in the sales budget. 4. Evaluation:- Sales department budgets become tools to evaluate the department’s performance. By meeting the sales & cost goals set forth in the budget, a sales manager may prove himself to be a successful executive. Sales budget can be determined on the basis of following categories:
Features1. The sales budget is the first component of the master operating budget. This is because sales affect all other parts of the master budget.2. It includes the total sales valued in quantity.3. It consists of three parts; break even, target and projected sales.4. The budget also includes sales by product, location, customer density and seasonal sales patterns.5. It provides a plan for both cash and credit sales.6. The basis of a sales budget is the sale price per unit of goods to be sold multiplied by the quantity of goods to be sold.7. A sales budget is planned around the competition, the material available, cost of distribution, government controls and the political climate.
ImportanceA good sales budget should serve as a guide to companywith regard to its sales target. It should be flexible andresilient to the volatile changes in the market. Thebudget should not put too many restraints on the salesfunctions of the company. A sales budget is a financialplan for the sales of goods and services of a company. Itis the basis on which all the financial decisions of acompany with regard to sales are taken. The budget alsocontrols the general sales prospects of a company.Online and off line marketing, marketing in the mediaand other advertising expenditures are planned around asales budget.
Sales ForecastingSales forecasting is the process of predicting sales of goods and services. Among the major factors considered when forecasting sales are:1. Past sales levels and trends 7. Planned advertising and product2. General economic trends promotion3. Economic trends in the 8. Expected action of competitors company’s industry 9. New products contemplated by4. Other factors expected to affect the company or other firms sales in the industry 10. Market research studies5. Political and legal events6. The intended pricing policy of the company
Master Budget Components Sales Budget Sales Budget Production BudgetDirect Material Direct Labor Mft. Overhead Operational Budget Budget Budget Budget Budgeted schedule Selling, General cost of goods Cash budget and Administrativemanufactured and sold Budget Budgeted income Statement R&D Budget Capital Budget Budgeted balance Marketing Statement Budget Budgeted Statement Customer Service of Cash Flows Budget 15-9
ADVANTAGES OF A SALES BUDGETA sales budget offers the following benefits:• It is helpful in farming sales programming so as to achieve the sales targets of the firm.• It is useful in allocation of resources to different products, sales territories,etc.for realising the forecast sales.• It is helpful in keeping expenses under control so that the objectives of net profits are achieved.• It serves as a yard stick for evaluating progress and sales performance of the company.• It can reveal the areas/products in which the company needs to strengthen its position.
Limitations: A sales budget comes with inherent limitations and a good sales budget is made by overcoming these limitations.1. A sales budget cannot effectively forecast the future trends of events.2. It may not be easily accepted by all people in the organization.3. Preparing a sales budget takes up too much managerial time.4. Usually sales budgets shy away from expenditure that will give returns in the long run.
PROCEDURE OF SALES BUDGETING1) Situation analysis 2) Identification of problems and opportunities 3) Development of sales forecast 4) Formulation of objectives 5) Determination of sales task
6)Specification of resourcesrequirements 7)Finalisation and projections 8)Presentation and review 9)Modification and revision 10)Budget approval
Factors influencing Sales budgetThere are various external as well as internal factors involved that influence the sales budget of any firm. Preparing a sales budget is much tougher than an expense budget. This is because everything in the expense budget are within company control. However in the case of a sales budget, the company can only control part of factors affecting the budgeted numbers and these are called INTERENAL FACTORS. The other part is influenced by the EXTERNAL FACTORS, such as economy, competition, season and government to a certain extent. Those factors that are not within the company’s control are budgeted based on assumptions.
INTERNAL FACTORS1. Volume of sales of the enterprise.2. Profitability of different products of the enterprise.3. Advertising and sales promotion strategies.4. Price policy.5. Ability and efficiency of the salesman. These factors fall within the reach of any organisation or enterprise, and hence if any improvement or changes are required,it could be easily incorporated,without any wastage of time and money.
EXTERNAL FACTORS 1. Purchasing power of the general public. 2. Industrial and taxation policy of the govt. 3. Changes in needs, habits & preference of the consumers. 4. Situation of competition in the market. 5. Distribution of wealth in the country.These factors greatly influence the sales budget of any organisation,in fact the sales budget of the firms are prepared in keeping the external factors in mind for the smooth running of the business.
A business manager should always go through the abovementioned factors before framing the final sales budget.The efficiency of any sales budget is dependent on howaccurately these external and internal factors areconsidered and kept in mind by the sales manager.However external factors play a more important role inpreparation of any sales budget as compared to internalfactors as the former is not under the control of theorganization , and also these external factors keepfluctuating from time to time. But to ignore internalfactors simply means one is preparing an incomplete salesbudget , thus both the factors should be kept in mind inorder to make an efficient sales budget.