Basic Introduction and concept of Sales Budget. Easy and helpful for Quick Revision.

1. GROUP PRESENTATION ON
SALES BUDGET
BY- Roll No. Name
13 Antriksh Bhatnagar
17 Rishabh Sharma
18 Sanjay Singh
19 Prateek Sharma

2. 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.

3. •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.

4. 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.

5. 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:

6. Features
1. 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.

7. Importance
A 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.

8. Sales Forecasting
Sales forecasting is the process of predicting sales of goods and services.
Among the major factors considered when forecasting sales are:
1. Past sales levels and trends 7. Planned advertising and product
2. General economic trends promotion
3. Economic trends in the 8. Expected action of competitors
company’s industry 9. New products contemplated by
4. Other factors expected to affect the company or other firms
sales in the industry 10. Market research studies
5. Political and legal events
6. The intended pricing policy of the
company

9. Master Budget Components
Sales Budget
Sales Budget
Production Budget
Direct Material Direct Labor Mft. Overhead Operational
Budget Budget Budget Budget
Budgeted schedule Selling, General
cost of goods Cash budget and Administrative
manufactured and sold Budget
Budgeted income
Statement R&D
Budget
Capital Budget Budgeted balance Marketing
Statement Budget
Budgeted Statement Customer Service
of Cash Flows Budget
15-9

10. 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.

11. 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.

12. 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

13. 6)Specification of resources
requirements
7)Finalisation and projections
8)Presentation and review
9)Modification and revision
10)Budget approval

14. 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.

15. 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.

16. 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.

17. 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.