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In the name of Allah the most
beneficent and merciful.
Sales Budgeting

         Presentation by:
 Gohar Majeed
 Aitzaz
 Abdul Haseeb Khan
 Aamir Ayyaz
 Zia ul Mustafa
 Syed Muhammad Rizwan
Presentation objectives

 Definition of sales budgeting
 Use of sales budgeting by sales
 management
 Explain major types of selling
 expense budgets.
 Identification of steps of sales
 budgeting procedure
 Actual sales budgeting practices
Budget:
        Financial statement that outlines
a firm’s intended actions and resulting
cash flow statements.

Sales Budgeting:
     Estimating future levels of revenue,
selling expenses, and profit
contributions of the sales function.
Zia ul Mustafa
Major budget categories


             Major budget categories


       Sales budget      Selling expense budget
Budget categories

 Sales budget: Projection of revenue
 computed from forecast unit sales
 and average prices.
 Selling expense budget: Approved
 amounts that management will spend
 to obtain the revenues projected in
 the sales budget.
Allocating Sales Costs


               Allocating Sales Costs


  Fixed cost       Variable cost        Semi variable cost
Allocating Sales Costs

 Fixed cost: Cost that don’t vary with
 output level and are incurred whether
 or not sales effort is made.
 Variable cost: Costs that fluctuate
 directly with level of sales activity
 Semi variable costs: Costs that vary,
 but not in direct proportion to sales
 volume.
Aamir Ayyaz
Major Selling Cost Categories
Selling
  Compensation( salary, commission, bonus, incentives)
  Travel and entertainment
  Prospect seminars
  Discounts and Allowances
Promotion
  Cooperative advertising allowances
  Catalogs, brochures, price lists
  Fairs and exhibits
  Samples, models, displays
  Selling aids
Major Selling Cost Categories

 Fulfillment
 Packaging and shipping
 Billing
 Credit
 Warranty
 Returns
 Servicing
 Distributor and customer training
 Technical Counseling
Major Selling Cost Categories

 Support
 Recruitment and selection
 Training and development
 Sales meetings
 Customer service
 Warehousing
 Administration
 Office expense
 Telephone and postage expense
Methods of funding sales force
    Affordable Method
   Percentage of sales method
   Competitive parity method
   Objective and Task method
   Other methods
•    Bidding Method
•   Return on investment
Methods of funding
 Affordable Method: Sales budgeting
 method in which management decides
 what share of revenues above and beyond
 the cost of goods sold it is prepared to
 spend on selling and administrative costs,
 after achieving a predetermined profit level.
 Law of diminishing returns: Additional units
 of input will first produce increasing, then
 diminishing and finally producing negative
 returns.
Methods of funding
 Percentage of sales method: Sales budgeting in
 which the funding level is found by multiplying
 sales revenues by a given percentage.
 Competitive Parity method: Sales budgeting
 method based on the competitive practices in an
 industry.
 Bidding System: Sales budgeting method in which
 functional areas compete on basis of expected
 payoffs.
 Return on Investment: Rate of return is
 determined by dividing net income by total assets
 employed to earn the income.
Syed Muhammad Rizwan
Sales Budgeting Procedure
 Situation Analysis
 Identification of problems and opportunities
 Development of sales forecast
 Formulation of sales objectives
 Determination of sales tasks
 Specification of resource requirements
 Completion of projections
 Presentation and review
 Modification and revision
 Budget approval
Tips for winning budget wars
Put things on hold
  Do not include new projects and venture in the
  budget during a slow businesses period
  Do not try new, untested programs
  Set priorities and stick with them

Be Realistic
  If cuts have to be made, make them
  Show management that you are willing to do your
  part
  It is better for you to make the cuts then for
  someone outside the department to mandate them
Tips for winning budget wars
Be Flexible
  If management wants still more cuts, be prepared
  to bargain
  Find out what management thinks is most
  important
  Be willing to compromise

Avoid Confrontation
  Try to understand upper management’s point of
  view
  Do not disagree with them on every issue
  Remember to save your best arguments for the
  really important projects.
Sales Budget Procedure
Budgeting cycle
            Develop corporate                             Evaluate sales     Integrate, review
                   mission,                               and marketing       and approve all
  Management
   Corporate


                objectives, and                          plans and make      budgets and one
                  strategies                            tentative resource     year resource
                                                            allocation           allocation

               Call for marketing
                      plans                              Call for budgets



                                    Recommended         Request functional    Submit budgets
  Management




                                      sales and               and
   Marketing




               Develop marketing
                                    marketing plans      developmental
                objectives and                              budgets
                                     and resource
                  strategies
                                        needs


                 Call for action       Evaluate                              Coordinate, review
                     plans           programs and                              and approve
                                      alternatives                               budgets
  Management




                                     Develop action                            Submit sales
     Sales




                                       programs                                 budgets for
                                                                                 approval

                                    Perform situation
                                        analysis                               Develop sales
                                                                                 budgets
Aitzaz Saeed
Advantages of budgeting
                    Define goal
                   and objectives
  Communicating                        Think about and
     plans                            plan for the future

                    Advantages
    Coordinate                        Means of allocating
     activities                           resources

                  Uncover potential
                    bottlenecks
Flexibility of sales budgeting

 To increase the flexibility of budgeting
 process some firms have adopted
 other budgeting approaches.
 Rolling budget
 Flexible budgeting
 Alternative budgeting
Flexibility of sales budgeting contd.

  Rolling budget: Budget using periodic
  updates that eliminate the immediate
  past period; the budgets for the
  following period are modified as
  needed, and another period is added
  at the end of the cycle.
Flexible budgeting (contd.)

Flexible budgeting: A budgeting
  process in which a base budget
  geared to average conditions is
  drawn up and then adjusted in
  accordance with the actual sales
  results.
Flexible budgeting (contd.)

Alternative budgeting: Budgets based
  on envisioned best case, most likely,
  and worst case scenario in order to
  achieve emergency preparedness.
Abdul Haseeb Khan
Benefits of budgeting
a) All levels of management plan ahead.
b) Definite objectives for evaluating performance.
c) Early warning system for potential problems.
d) Coordination of activities within the business.
e) Management awareness of the entity’s overall
   operations.
f) Motivates personnel throughout organization to meet
   planned objectives.
Thanks

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Bugeting

  • 1. In the name of Allah the most beneficent and merciful.
  • 2. Sales Budgeting Presentation by: Gohar Majeed Aitzaz Abdul Haseeb Khan Aamir Ayyaz Zia ul Mustafa Syed Muhammad Rizwan
  • 3. Presentation objectives Definition of sales budgeting Use of sales budgeting by sales management Explain major types of selling expense budgets. Identification of steps of sales budgeting procedure Actual sales budgeting practices
  • 4. Budget: Financial statement that outlines a firm’s intended actions and resulting cash flow statements. Sales Budgeting: Estimating future levels of revenue, selling expenses, and profit contributions of the sales function.
  • 6. Major budget categories Major budget categories Sales budget Selling expense budget
  • 7. Budget categories Sales budget: Projection of revenue computed from forecast unit sales and average prices. Selling expense budget: Approved amounts that management will spend to obtain the revenues projected in the sales budget.
  • 8. Allocating Sales Costs Allocating Sales Costs Fixed cost Variable cost Semi variable cost
  • 9. Allocating Sales Costs Fixed cost: Cost that don’t vary with output level and are incurred whether or not sales effort is made. Variable cost: Costs that fluctuate directly with level of sales activity Semi variable costs: Costs that vary, but not in direct proportion to sales volume.
  • 11. Major Selling Cost Categories Selling Compensation( salary, commission, bonus, incentives) Travel and entertainment Prospect seminars Discounts and Allowances Promotion Cooperative advertising allowances Catalogs, brochures, price lists Fairs and exhibits Samples, models, displays Selling aids
  • 12. Major Selling Cost Categories Fulfillment Packaging and shipping Billing Credit Warranty Returns Servicing Distributor and customer training Technical Counseling
  • 13. Major Selling Cost Categories Support Recruitment and selection Training and development Sales meetings Customer service Warehousing Administration Office expense Telephone and postage expense
  • 14. Methods of funding sales force  Affordable Method  Percentage of sales method  Competitive parity method  Objective and Task method  Other methods • Bidding Method • Return on investment
  • 15. Methods of funding Affordable Method: Sales budgeting method in which management decides what share of revenues above and beyond the cost of goods sold it is prepared to spend on selling and administrative costs, after achieving a predetermined profit level. Law of diminishing returns: Additional units of input will first produce increasing, then diminishing and finally producing negative returns.
  • 16. Methods of funding Percentage of sales method: Sales budgeting in which the funding level is found by multiplying sales revenues by a given percentage. Competitive Parity method: Sales budgeting method based on the competitive practices in an industry. Bidding System: Sales budgeting method in which functional areas compete on basis of expected payoffs. Return on Investment: Rate of return is determined by dividing net income by total assets employed to earn the income.
  • 18. Sales Budgeting Procedure Situation Analysis Identification of problems and opportunities Development of sales forecast Formulation of sales objectives Determination of sales tasks Specification of resource requirements Completion of projections Presentation and review Modification and revision Budget approval
  • 19. Tips for winning budget wars Put things on hold Do not include new projects and venture in the budget during a slow businesses period Do not try new, untested programs Set priorities and stick with them Be Realistic If cuts have to be made, make them Show management that you are willing to do your part It is better for you to make the cuts then for someone outside the department to mandate them
  • 20. Tips for winning budget wars Be Flexible If management wants still more cuts, be prepared to bargain Find out what management thinks is most important Be willing to compromise Avoid Confrontation Try to understand upper management’s point of view Do not disagree with them on every issue Remember to save your best arguments for the really important projects.
  • 21. Sales Budget Procedure Budgeting cycle Develop corporate Evaluate sales Integrate, review mission, and marketing and approve all Management Corporate objectives, and plans and make budgets and one strategies tentative resource year resource allocation allocation Call for marketing plans Call for budgets Recommended Request functional Submit budgets Management sales and and Marketing Develop marketing marketing plans developmental objectives and budgets and resource strategies needs Call for action Evaluate Coordinate, review plans programs and and approve alternatives budgets Management Develop action Submit sales Sales programs budgets for approval Perform situation analysis Develop sales budgets
  • 23. Advantages of budgeting Define goal and objectives Communicating Think about and plans plan for the future Advantages Coordinate Means of allocating activities resources Uncover potential bottlenecks
  • 24. Flexibility of sales budgeting To increase the flexibility of budgeting process some firms have adopted other budgeting approaches. Rolling budget Flexible budgeting Alternative budgeting
  • 25. Flexibility of sales budgeting contd. Rolling budget: Budget using periodic updates that eliminate the immediate past period; the budgets for the following period are modified as needed, and another period is added at the end of the cycle.
  • 26. Flexible budgeting (contd.) Flexible budgeting: A budgeting process in which a base budget geared to average conditions is drawn up and then adjusted in accordance with the actual sales results.
  • 27. Flexible budgeting (contd.) Alternative budgeting: Budgets based on envisioned best case, most likely, and worst case scenario in order to achieve emergency preparedness.
  • 29. Benefits of budgeting a) All levels of management plan ahead. b) Definite objectives for evaluating performance. c) Early warning system for potential problems. d) Coordination of activities within the business. e) Management awareness of the entity’s overall operations. f) Motivates personnel throughout organization to meet planned objectives.