Kenya Coconut Production Presentation by Dr. Lalith Perera
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.
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.
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.