Sales Budget Definition: Sales budget refers to

Transcript:Sales Budget Definition: Sales budget refers to:
Sales Budget 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. Determine Sales Goals: Sales budget sets a target for the sales team which they have to achieve. The expected sales volume for a particular period is determined, and the efforts of the sales department are directed accordingly. NEED FOR SALES BUDGET Cash Flow Management: The company can estimate its future cash inflow and outflow through sales budgeting. This helps in determining the potential liquid cash and prepares for unfavourable market conditions. Estimate Overhead Costs: It also estimates the various administrative and sales expenses which the company has to bear other than the manufacturing cost. Thus, determining the potential profit margin. Develop Core Strategies: A sales budget provides a base for action to the managers. The managers frame their strategies and utilize the resources to attain the desired sales goals. Streamlines Business Process: All the business activities, i.e. production of goods or services, financing the operations, engaging the human resource and marketing activities, are based on the prepared sales estimate. Internal Factors The 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: Sales Trend: The past sales made by the company within a specific period plays a significant role in determining future sales possibilities. Production Capacity: The maximum utilization of the plant’s manufacturing capacity should be considered for the preparation of the sales budget. Product Diversification and Product Development: When the company enters into a new product line to increase its sales volume and profitability, it must prepare the sales budget accordingly to facilitate product development. Seasonal Fluctuation: The company has to figure out the changes in the sales trend during seasonal fluctuations like weekends, the first week of every month, festivals, etc. while determining the sales forecast. Selling and Distribution Channel: The selected marketing channel profoundly affects the sales forecast. Like for direct sale of goods, a more accurate sales data can be gathered, and hence a better sales estimate can be prepared. Sales