The document discusses the purpose and types of sales budgets, including how sales budgets serve as both a control mechanism and planning instrument. It outlines different budgeting methods like percentage of sales and affordability, and provides steps for developing a sales budget such as reviewing past performance, forecasting sales, and communicating goals. The sales budget is a key part of the overall master budget for a company.
The document discusses the purpose and types of sales budgets, including how sales budgets serve as both a control mechanism and planning instrument. It outlines different budgeting methods like percentage of sales and affordability, and provides steps for developing a sales budget such as reviewing past performance, forecasting sales, and communicating goals. The sales budget is a key part of the overall master budget for a company.
The document discusses the purpose and types of sales budgets, including how sales budgets serve as both a control mechanism and planning instrument. It outlines different budgeting methods like percentage of sales and affordability, and provides steps for developing a sales budget such as reviewing past performance, forecasting sales, and communicating goals. The sales budget is a key part of the overall master budget for a company.
Purpose Only Programme Educational Objectives Our program will create graduates who:
1.Will be recognized as a creative and an enterprising team
leader. 2.Will be a flexible, adaptable and an ethical individual. 3.Will have a holistic approach to problem solving in the dynamic business environment.
For Internal Circulation and Academic
Purpose Only Sales and Distribution Management Course Outcomes
• CO1- Given a situation of Festival, student manager will be
able to identify appropriate Sales Forecasting method to be adopted by a company.
• CO2- Given a situation of opening a new outlet, student
manager will be able to draft a sales plan.
• CO3- Given a situation of Selling products / services,
student manager should be able to explain Personal Selling Process.
For Internal Circulation and Academic
Purpose Only • CO4-Given a criteria of newly launched company, student manager should be able to design an effective Sales Compensation Plan for Sales Executive.
• CO5-Given a criteria of distribution channel of a company,
student manager should be able to outline different levels of Marketing channel used by the company.
• CO6-Given a situation, student manager should be able to
explain the process of Reverse Logistics.
For Internal Circulation and Academic
Purpose Only Sales Budget Purpose:
Sales budget serves two purposes – it is a mechanism
of control and an instrument of planning. Budgets clearly define the resources require for performing activities that help an organization achieve its goals and act as an effective tool for controlling firms performance. Should be developed by those responsible for achieving the stated objectives. Generally a firms budgeting process depends on the revenues it has been getting.
For Internal Circulation and Academic
Purpose Only ….it is a Mechanism of control Controlling and planning are inter-linked and one is useless without the other.
Budgeting in itself is a controlling process.
It emphasizes on controlling the deviations.
For Internal Circulation and Academic
Purpose Only …is an instrument of Planning Is the process of determining a future course of action for helping employees trend a path.
Forecasting sales, scheduling the production process
and budgeting the expenditure for the organization are part of planning.
Should be followed diligently by all.
For Internal Circulation and Academic
Purpose Only For budget to act as an effective planning tool, they must be developed very carefully by following certain steps – assessing the previous years financial performance, connecting the current years expenditure and programes with long term strategies, developing short term activities to achieve long term activities and finally communicating plans to all those concerned.
The next step is to identify the best ways to achieve
these goals and to assess the expenditure that will be so incurred.
For Internal Circulation and Academic
Purpose Only Benefits of Budgeting 1) Improved Planning ---
It enhances the quality of planning as it
describes the actions to be taken in quantitative terms.
Although budgeting process can only guide
the firm to follow a path that will lead to profits, it definitely helps improve planning. For Internal Circulation and Academic Purpose Only 2) Better Communication and Co- ordination—
As budgeting gives the future course of
action in quantitative terms for functions like sales, production, personnel tec.., it forms the basis for co-ordination within the organization.
For Internal Circulation and Academic
Purpose Only 3) Control and Performance Evaluation---
Any deviation from the plan can be easily
identified by conducting periodic reviews.
This will help the management to take
necessary steps to rectify the situation.
For Internal Circulation and Academic
Purpose Only 4) Psychological Benefits---
Budget instills a sense of profit
consciousness in employees.
Budgetary controls remain in the minds of
sales personnel and encourage them to achieve the sales target with the least possible expenses.
For Internal Circulation and Academic
Purpose Only TYPES OF BUDGET Sales Budget Selling Expense Budget Administrative Budget And Profit Budget
For Internal Circulation and Academic
Purpose Only TYPES OF BUDGET 1) SALES BUDGET Is a detailed plan showing the expected sales for a future period.
It is developed based on expected revenues from the
sales.
It is the first part of master budget and forms the
budget for the basis for other operational budgets like finance and production budgets.
For Internal Circulation and Academic
Purpose Only 2) SELLING EXPENSE BUDGET
Is a plan that gives expenses that would be incurred by the
sales department to achieve the planned sales.
These expenses could be salaries or commissions,
travelling and entertainment expenses.
Allocating a percentage of sales.
Cost incurred in training a salesperson when a new
product line is added should be included in the selling expense budget.
Finally this must be closely linked with the Sales Budget.
For Internal Circulation and Academic Purpose Only 3) ADMINISTRATIVE BUDGET AND PROFIT BUDGET
It comprises the budget allocation for general
administrative expenses such as rent, electricity, office furniture, stationary and other costs incurred by the sales department.
In profit budget, the gross profits are calculated by
deducting the sales expenses from the revenues generated by the sales department.
For Internal Circulation and Academic
Purpose Only METHODS OF BUDGETING Different types of methods are:
1) Affordability 2) Percentage of Sales 3) Competitive Parity 4) Objective and Task 5) Return Oriented
For Internal Circulation and Academic
Purpose Only 1) Affordability method
Is a process where the management develops the
sales budget depending on its ability to spend on sales functions.
Here a firm develops the budget based on
whether it can afford to spend a certain amount for selling it goods.
For Internal Circulation and Academic
Purpose Only 2) Percentage of Sales
Is used for developing by multiplying sales
revenue by a given percentage.
The sales revenues used may be a past sales
revenue figure or a forecasted figure.
Sometimes, even a weighted average of the two is
used.
For Internal Circulation and Academic
Purpose Only 3) Competitive Parity In this method, the sales manager sets the budget based on the budgeted figures of the competitors or the industry average.
The budget is based on a comparable base - size
and revenues.
For Internal Circulation and Academic
Purpose Only 4) Objective and Task The management develops the budget the budget based on the objectives to be attained.
Involves 4 steps :
1. Identification of objectives of the sales department.
2. Next, the tasks to be performed for achieving the objectives are specified. 3. Third step involves determining the expenditure required for the tasks. 4. Fourth step involves adding all the above expenses to arrive at a final figure for the purpose of budgeting. For Internal Circulation and Academic Purpose Only 5) Return Oriented method The methods like return on investment (ROI), return on assets (ROA), return on total assets (ROTA)return on asset managed (ROAM) are some tools that help managers to develop a sales budget.
It helps the sales managers analyse the
impact of a particular sales cost allocation on revenues and profits generated by sales.
For Internal Circulation and Academic
Purpose Only Procedure for developing a sales budget 1) Review and Analysis of situations 2) Identifying Specific Market Opportunities and Problems 3) Sales Forecasting 4) Communicating Sales Goal and Objectives 5) Preliminary allocation of resources 6) Preparing the budget 7) Getting Approval For Internal Circulation and Academic Purpose Only