Definition: Sales budget refers to the estimation of the sales revenue and the sales overheads for a particular period. A more accurate sales forecast means better utilization of resources, higher profitability and less wastage. Sales forecasting, which is nothing but an estimation of demand for goods or services in the market is essential for preparing a sales budget. Show Salespeople and the marketing team plays a crucial role in forecasting the sales of products or services for the company. Let us understand this concept through an example; A clothes merchant estimates his sales budget yearly. Based on the past sales trend, he observes that he sells the highest during the festive season, marriage season and the first week of every month. Accordingly, he plans his inventory, salespeople, finances, and other resources to earn a maximum profit and minimize the dead stock. Content: Sales Budget
Preparing a sales budget is a step by step process. It involves keen observation, research, analysis and decision making. Let us now go through the various stages of preparing a sales budget:
Factors Influencing Sales BudgetThe sales budget is not a vague assumption of sales. However, it is a well-planned strategy to streamline the various business operations and set some realistic and achievable targets for the team. It is framed by different factors existing in the business environment. These factors can be bifurcated into the following two categories:
Internal FactorsThe company’s inner strengths or weaknesses, influence its sales budget. It involves factors like plant’s production capacity, marketing channel, promotion and advertisement, sales volume and revenue, etc. Let us now discuss these factors in detail below:
External FactorsThe external environment of the business consists of multiple opportunities as well as specific threats which affect all the business decisions. These factors comprise government intervention, economic condition, technological advancement, consumer demand and competition. To know about these factors in detail, read below:
Need for Sales BudgetA company always encounter questions like; How much to produce? How much revenue can be generated from sales? What about the dead stock? What all expenses to be incurred in selling the products? Sales budget answers all such questions. It is the basis for all the operational decisions taken in the organization. To further understand the importance of preparing a sales estimate in the organization, read below:
ConclusionPreparation of the sales budget requires a lot of research, experience and expertise. It is the initial stage of drafting the company’s financial budget. A vague sales forecast can lead to a weak sales budgeting which can prove to be disastrous for the business. Thus, effective sales management is required for organizational growth or success. What are the factors affecting to preparation of budget?Factors Affecting the Budget. Income of the Family.. Size of the Family.. Composition of the Family.. Occupation of the Family members.. Intercity Differences.. Family Goals.. Socio-economic Status of the Family.. Gainful Employment.. What are the 5 factors to be considered in budgeting?Here are 5 factors to think about as you prepare your budget:. Your Income Structure. The way in which money comes into your income statement is critical for planning cash flow. ... . Your Spending Habits. ... . Your Use (or Not) of Credit & Debt. ... . Your Tech Savvy. ... . Your Personality.. Which of the following factors is not considered in sales budget?The correct answer is The Capital Expenditures Budget. Capital expenditure budget is the company's plan for the assets to be purchased or disposed at a specific period. This is not considered in making sales budget because it is not related to sales.
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