SS/ MB 301/ S & D M/ 09

A sales budget consists of estimates of an operating periods probable rupee sales & the likely selling expenses. Sales budget is a mechanism of control. The completed budget serves as a yardstick against which progress of sales, expenses, profits are measured. Sales budget is an instrument of planning as it determines the ways & means for the business to get from where it is & where it wants to go.
SS/ MB 301/ S & D M/ 09 2

The sales budget is statement of projected sales revenues & selling expenses both in rupee & unit sales (so as to take care of price changes). The sales of each product by each territory, by each quarter, by each month by each class of account is shown.
Total

Territory / Quarter/ Month/ Account Product A Product B Product C

SS/ MB 301/ S & D M/ 09

The sales budget is drafted with a view toward obtaining the optimum net profit, and not maximum. Net profit = Revenue Expenses. Considerations of business building like customer services, new account calls are thought of as investment and not expenses. Thus, in the budgeting exercise, long term planning is done.
SS/ MB 301/ S & D M/ 09 4

In almost all companies, the sales department prepares the budget first. The production department takes cues from it as to how much to produce, the finance department prepares budget for expenditures, earnings & cash position after looking at the sales budget, and so on. There are two budgetary procedures, the top down & bottom up procedure. Top down procedure follows theory X that people dislike work and needs to be told what to do. Bottom up procedure follows theory Y wherein people participate in planning.

SS/ MB 301/ S & D M/ 09

The sales executive must argue for an equitable share of funds so as to handle competition. The sales budget has to be sold to the top management. The top management is generally unaware of the difficulties faced by the sales department. The budget thus finalized, then works as a tool of measurement of performance of the sales executives. In case of deviation from the budget two thing have to be considered: If more expenses is due to inefficient coverage, it has to be rectified. If more expenses are due to new customer calls not covered before, then budget has to be revised.

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SS/ MB 301/ S & D M/ 09