Sales budget

Sales Budget in Sales Management
Features,Factors Affecting, Types, Essentials, Approaches, Procedure, Importance, Limitations, Methods

1. Submitted By: Sanya Jain MCom -II

2. Sales Budget A sales budget is management's estimate of sales for a future financial period. A business uses sales budgets to set department goals, estimate earnings and forecast production requirements . It specifies: How much quantity to be sold In which territories goods are to be sold To what type of customers goods are to be sold What will be the estimated amount of sales/selling expenses How projected sales/selling expenses will affect our profits

3. Sale Budget is the basic budget which influences budgets of other departments like production budget, purchase budget, labour budget, overhead budget, cash budget, etc. It helps in exercising control over sales force as it sets standards before the sales force. It helps in formulating plans, policies, strategies of other departments.

4. Features of Sales Budget Estimates sales in units and in rupees. It is made by sales department. It is prepared for a definite future period. Anticipates level of sales and selling expenses. Affects budget of other departments. Helps to coordinate activities of other functional departments. Helps in exercising control over sales force. Used as a planning instrument for various departments It is a continuous activity.

5. Types of Sales Budget Sales Budget a) Estimates the sales in terms of units and value in rupees. b) Based on past sales and trends in sales and can be adjusted for expected changes. c) Gives estimates of sales- product wise, area wise, month wise.

6. 2) Selling Expense Budget It is about approved selling expenses which can be incurred to achieve estimated sales in the budget period. All expenses relating to selling and distribution of the products are included. Gives detailed information about various selling expenses which salesman can incur to achieve sales targets.

7. d) Expenses can be -fixed, variable or semi variable -administrative, personal selling expenses, distribution and promotion expenses

8. Essentials of Sales Budget Support of Top Management Formation of Sales Budget Committee Considering Various Internal and External Factors Clearly Defined Sales Policy Well Defined Responsibility Centers Periodic Review Attainable Goals Flexibility Clearly Defined Budget Period

9. Approaches to Sales Budget Formulation I. Top-Down Approach The top management decides goals and budgets which are communicated to different sales departments along with disbursal of funds. II. Bottom-Up Approach The sales departments are asked to set their budget levels according to their goals and communicate it to the to management level where, finally these are aggregated.

10. Bottom-Up Approach

11. Sales Budget Procedure

12. Importance of Sales Budget Helps in Planning Control over Sales Force Control over Selling Expenses Identifying Weak Points Helps to Increase Sales and Profits Motivates the Sales Force Helps to Operate Effective Compensation Plans Launch Special Sales Promotion Improve Overall Efficiency Coordinate the Activities Allocate and Assign Sales Operations

13. Limitations of Sales Budget Based on Estimates and Forecasts Need for Frequent Revisions Brings Rigidity Increasing Cost of Framing Sales Budget Changes in Consumer Behavior Non-availability of Accurate Data Inefficient Sales Budget Experts Difficulty in Anticipating Plans of Competitors

14. Methods of Determining Amount of Selling Expenses Percentage of Sales Method Selling Expenses Amount= Past Year’s Sales or Anticipated Sales * Pre-determined Percentage For example: if anticipated sales are Rs.300 Lakh and percentage of selling expenses is 3%, then the company can spend Rs. 9 lakh as selling expenses. Competitive Parity Method Collection of data regarding competitors’ selling expenses based on the assumption that competitor has framed their selling expense budget correctly.

15. 3) Objective and Task Method It is goal oriented method and determines selling expenses by: a) Identify selling tasks to achieve target sales b) Identify cost of these tasks c) Aggregate all such costs and provide some amount of contingencies 4) Affordable Method This considers funds available with the company for determining selling expenses. It depends upon ‘what the company can afford’ and ignores the actual requirements for selling expenses to achieve sales targets.

16. References Sales Management- Pearson Sales Management – C.N. Sontakki Sales Management – Cundiff and Still Advertising and Sales Management – VK Publications Sales Management- Pardeep Kumar