GROUP PRESENTATION ON SALES BUDGET

BY- Roll No. Name

13 Antriksh Bhatnagar

17 Rishabh Sharma

18 Sanjay Singh

19 Prateek Sharma

Meaning of Sales Budget

Sales budgeting is a key function of sales management. It involves estimating future level of revenue and selling expenses, and consequently the profit contribution made by the sales function. The outcome of sales budgeting is seen in the form of two documents:

1.The sales budget, and

2.The selling expenses budget.

•Sales Budget reflects the targeted sales 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.

More specifically, Sales Budget is a detailed programme developed for a specified period that indicates the anticipated sales & selling expenses.

The sales budget is prepared by multiplying the expected unit sales volume for each product by its anticipated unit selling price.Each of the other budgets such as production budget, direct material budget, direct labor budget, manufacturing overhead budget & Selling and administration budget depends on the sales budget.It is derived from the sales forecast. It represents management’s best estimate of sales 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 company with regard to its sales target. It should be flexible and resilient to the volatile changes in the market. The budget should not put too many restraints on the sales functions of the company. A sales budget is a financial plan for the sales of goods and services of a company. It is the basis on which all the financial decisions of a company with regard to sales are taken. The budget also controls the general sales prospects of a company. Online and off line marketing, marketing in the media and other advertising expenditures are planned around a sales budget.

Among the major factors considered when forecasting sales are:

Sales forecasting is the process of predicting sales of goods and services.

Sales Forecasting

1. Past sales levels and trends

2. General economic trends

3. Economic trends in the company’s industry

4. Other factors expected to affect sales in the industry

5. Political and legal events

6. The intended pricing policy of the company

7. Planned advertising and product promotion

8. Expected action of competitors

9. New products contemplated by the company or other firms

10. Market research studies

15-9

Sales Budget

Production Budget

Direct Material Budget

Budgeted schedulecost of goods

manufactured and sold

Capital Budget Budgeted balanceStatement

Direct Labor Budget

Mft. Overhead Budget

Cash budget

Budgeted incomeStatement

Budgeted Statement of Cash Flows

Sales Budget

Selling, Generaland Administrative

Budget

R&D Budget

Marketing Budget

Customer Service Budget

Operational Budget

Master Budget Components

ADVANTAGES OF A SALES BUDGET

A 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 BUDGETING

1) 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 resources requirements

7)Finalisation and projections

8)Presentation and review

9)Modification and revision

10)Budget approval

Factors influencing Sales budget

There 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 FACTORS

1. 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

above mentioned factors before framing the final sales budget.

The efficiency of any sales budget is dependent on how accurately these external and internal factors are considered and kept in mind by the sales manager.

However external factors play a more important role in preparation of any sales budget as compared to internal factors as the former is not under the control of the organization , and also these external factors keep fluctuating from time to time. But to ignore internal factors simply means one is preparing an incomplete sales budget , thus both the factors should be kept in mind in order to make an efficient sales budget.