Sales Budget SDM

Sales Budget
For Internal Circulation and Academic

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.

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.

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.

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.

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.

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.

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.

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.
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.

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.

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.

Purpose Only
TYPES OF BUDGET
 Sales Budget
 Selling Expense Budget
 Administrative Budget
 And Profit Budget

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.

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.

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.

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

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.

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.

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.

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.
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.

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
Purpose Only

Sales Budget SDM

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Sales Budget

For Internal Circulation and Academic

 1.Will be recognized as a creative and an enterprising team

For Internal Circulation and Academic

• CO1- Given a situation of Festival, student manager will be

• CO2- Given a situation of opening a new outlet, student

• CO3- Given a situation of Selling products / services,

For Internal Circulation and Academic

• CO5-Given a criteria of distribution channel of a company,

• CO6-Given a situation, student manager should be able to

For Internal Circulation and Academic

 Sales budget serves two purposes – it is a mechanism

For Internal Circulation and Academic

 Budgeting in itself is a controlling process.

 It emphasizes on controlling the deviations.

For Internal Circulation and Academic

 Forecasting sales, scheduling the production process

 Should be followed diligently by all.

For Internal Circulation and Academic

 The next step is to identify the best ways to achieve

For Internal Circulation and Academic

 It enhances the quality of planning as it

 Although budgeting process can only guide

 As budgeting gives the future course of

For Internal Circulation and Academic

 Any deviation from the plan can be easily

 This will help the management to take

For Internal Circulation and Academic

 Budget instills a sense of profit

 Budgetary controls remain in the minds of

For Internal Circulation and Academic

For Internal Circulation and Academic

 It is developed based on expected revenues from the

 It is the first part of master budget and forms the

For Internal Circulation and Academic

 Is a plan that gives expenses that would be incurred by the

 These expenses could be salaries or commissions,

 Allocating a percentage of sales.

 Cost incurred in training a salesperson when a new

 Finally this must be closely linked with the Sales Budget.

 It comprises the budget allocation for general

 In profit budget, the gross profits are calculated by

For Internal Circulation and Academic

For Internal Circulation and Academic

 Is a process where the management develops the

 Here a firm develops the budget based on

For Internal Circulation and Academic

 Is used for developing by multiplying sales

 The sales revenues used may be a past sales

 Sometimes, even a weighted average of the two is

For Internal Circulation and Academic

 The budget is based on a comparable base - size

For Internal Circulation and Academic

1. Identification of objectives of the sales department.

 It helps the sales managers analyse the

For Internal Circulation and Academic

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