• Home
  • Finance
    • Financial Management
    • Strategic Management
    • Investment Analysis and Portfolio Management
    • Project Management
    • Islamic Banking & Finance
    • Auditing
  • Marketing
    • Principle of Marketing
    • Marketing Management
    • International Marketing
    • Advertising & Promotion
    • Commercial Challenges
  • HRM
    • Human Resource Management
    • Principles of Management
    • Training & Development
    • Employee Performance Management
  • Others
    • Introduction to Business
    • Business Communication
    • Banking & Finance
    • Entrepreneurship
    • Economics
  • Personal Skills
  • Tips & Tricks
  • About Us
    • Contact US

Business Study Notes

B.Com, M.Com. BBA & MBA Exam Study Online

  • Home
  • Finance
    • Financial Management
    • Strategic Management
    • Investment Analysis and Portfolio Management
    • Project Management
    • Islamic Banking & Finance
    • Auditing
  • Marketing
    • Principle of Marketing
    • Marketing Management
    • International Marketing
    • Advertising & Promotion
    • Commercial Challenges
  • HRM
    • Human Resource Management
    • Principles of Management
    • Training & Development
    • Employee Performance Management
  • Others
    • Introduction to Business
    • Business Communication
    • Banking & Finance
    • Entrepreneurship
    • Economics
  • Personal Skills
  • Tips & Tricks
  • About Us
    • Contact US
Home » Sales Budget – Preparation of Sales Budget

Sales Budget – Preparation of Sales Budget

By Richard Daniels Reading Time: 4 mins
Updated March 24, 2021

Sales Budget

Making a sales budget is not easy. It is not for commercials that are in direct contact with customers. Neither for those responsible for operations and finances who must prepare the forecast of manufacturing or treasury based on the forecast of sales.

How to make a Sales Budget?

In this article we will explain how you can optimize your sales budget. By following the steps outlined above, you can more accurately predict the results and more accurately adjust production and cash flow to the needs of your business activity.

Data Collection

As the first phase consists of the collection of historical sales data. The more detailed the data, the better. Thus the breakdown can be by customer and by category.

However, quantity is not always associated with quality. There are many causes that may have affected sales in the past and diminish their usefulness in predicting future developments. That is why it is necessary to have qualitative information that allows us to put in context historical sales information.

The source of such qualitative information is the customers. It is important that customers provide information on the level of orders for the next periods. This information should be asked with some tact. As it could be confused with a pressure to buy more. Often, quantities may be distorted by negotiation between the parties.

More from Business Study Notes:- Capital Budgeting Techniques

In any case, it is always better to have a reference provided directly by the customer. The commercial responsible for the account is usually responsible for collecting this information. Subsequently, the commercial will transmit the information to the person responsible for the forecast.

Consolidation

The next phase is consolidation. The consolidation task involves the following tasks:

  • Filter the information received in the previous phase
  • Organize the information
  • Predictive calculations

Example

Imagine a company that manufactures plastic bottles for three customers. To make the forecast for the manufacturing treasury during the second half of the year. In fact the commercial department asks customers to estimate their orders for the third and fourth quarter.

The management control department is in charge of making the final forecast.

Information Provided by the Clients 
  • A: orders for 30,000 currency units
  • B: orders for an amount of CU50,000
  • C: orders for an amount of CU20,000

Where A,B,C are the Customers.

As, the billing information of customers during the previous year was as follows:

  • A: orders for 120,000 monetary units
  • B: orders for an amount of CU20,000
  • C: Requests for an amount of CU50,000

It is clear that data is missing in order to make a reliable forecast.

First, forecasts for orders should always be expressed in volume , not in monetary amount. This will avoid confusing the effect variations in price increments of product demand. For this case, we will assume that last year the price was 10 monetary units per unit of product. This price will be maintained throughout this year.

Additionally, the manager of the forecast needs to know qualitative information about each of the companies. Therefore, a list of questions to the commercial responsible for each account may suffice.

  • Why has customer A had such an important drop in orders?
  • Is the increase predicted by customer B reliable?
  • Is there any element that could distort customer C’s forecast?

After completing the information with the sales managers, responsible for forecasting decides to apply an adjustment to the forecasts of each client.

  • A: 3,000 units x 10 um / ud x 80% = 24,000 units
  • B: 5,000 units x 10 um / ud x 30% = 15,000 units
  • C: 2,000 units x 10 um / ud x 100% = 20,000 units
Total: 59,000 one

Having the breakdown between units and price, we can be sure that we will not confuse the effects of volume increase and price variation.

The correcting percentage is a qualitative estimate that makes the person responsible for the prediction based on his experience and the information collected. It is necessary to be able to argue this correction. Why do we need to correct data that comes directly from customers? Because often these forecasts are distorted upwards or downwards. In fact, we try to prevent an excess of production that generates obsolete stock or stock breaks due to insufficient production.

Communication

The last phase consists of the communication of the results of the forecast.

First an internal communication will be made. The head of the forecast will meet with the commercials. Then provide the information and share the corrective percentages used.

The utility of communicating these percentages is able to confirm that they are based on firm criteria. Sometimes they must be rectified.

Finally, the forecast will be communicated to the production and finance departments. So they can use it in their manufacturing and cash forecasts.

Predicting sales is always a complicated task. It is important to involve the commercial department in order to make a prediction that includes all relevant information. A correct sales forecast depends on the correct use of company resources. Therefore, is a task that must involve all departments.

 

Author at Business Study Notes
Richard DanielsAuthor at Business Study Notes

Hello everyone! This is Richard Daniels, a full-time passionate researcher & blogger. He holds a Ph.D. degree in Economics. He loves to write about economics, e-commerce, and business-related topics for students to assist them in their studies. That's the sole purpose of Business Study Notes.
Love my efforts? Don't forget to share this blog.

Related Posts:

  • Cash Flow Chart
    Cash Flow Chart
  • Slippery Cash Flow Forecast - How to Make it
    Slippery Cash Flow Forecast - How to Make it
  • Detection and Resolution of Cash Crises in Business
    Detection and Resolution of Cash Crises in Business
  • How to Calculate Slack Time? Slack Time Formula Explained…
    How to Calculate Slack Time? Slack Time Formula Explained with Example
  • Communication Strategies Definition | Types of Communication…
    Communication Strategies Definition | Types of Communication Strategies

Filed Under: Entrepreneurship Tagged With: Preparation of Sales Budget

Related Posts

System-Views-of-Management-image

System Views of Management

System Views System views of management associates with the Management division of the organization and it assumes that all of the organizations are … [Read More...]

Leadership Theories

Situational Leadership Theories

Situational Leadership Theories Situational model of leadership is a factor that emphasizes the behavior of the leaders regarding different situations. … [Read More...]

Behavioral Leadership Model

Behavioral Leadership Model

Leadership  Leadership is the most critical and complex responsibility across any organization. It is because the leadership requires to be realistic, … [Read More...]

career development process in hrm

Career Development Process

Career Development Process Today's career development process has become a threat for students, especially a question that may stun many students who have … [Read More...]

Strategic leadership

Strategic Leadership Model

Strategic Leadership Model The strategic leadership model is basically the study of the leadership style. It describes the ways of modernizing an … [Read More...]

Types of Managerial Decision Making

Types of Managerial Decision Making

Managerial Decision Making Decision Making is an art of selection of one feasible alternative decision from many. Therefore types of managerial decision … [Read More...]

Quantitative-management-approach

Quantitative Management Approach

Quantitative Management Approach The quantitative management approach is used to enhance decision making power by using quantitative tools. As well as … [Read More...]

Effective-business-messages-image

Effective Business Messages

Effective Business Messages The process through which business messages are effectively prepared that have the potential to create desired results from … [Read More...]

Search the Site

ADVERTISEMENT

Business Study Notes

Business Study Notes is all about business studies or business education. Visit us to find here free business notes of all the subjects of B.com, M.com, BBA & MBA online.

Disclaimer

All the images and videos present on the Business Study Notes are not owned by us, if you found anything under copyrights, please Contact Us, we will remove it ASAP.

Categories

© Copyright 2023 Business Study Notes. All rights reserved. Privacy Policy, Sitemap.  
DMCA
PROTECTED