Syllabus

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Sales Forecasting & Budgeting
Why is it needed ??
• Estimate of a company’s sale for a specified future period
• Financial budget is dependent upon the sales forecast for the
projected revenue figures
• Human resource executives use sales forecasts to project
staffing needs
• Financial executives use it in establishing and controlling
operating and capital budgets
• Production manager uses it to schedule purchasing and
production to control inventories

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Sales Forecasting Concepts
There are 5 levels of concern in sales forecasting:
1. Market Potential
2. Sales Potential
3. Sales Forecasts
4. Sales Quotas
5. Sales Budgets

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Market Potential
It is the highest possible expected industry sales of a good or service in
a specified market segment for a given time period
Sales Potential
Refers to an individual firms market share of the market potential
Sales Forecasts
Sales estimate the company actually expects to obtain, based on the
market conditions, company resources, and the firms marketing plan
Sales Quota
Sales goal assigned to a sales person, region or a team. They are usually
derived from the sales forecasts
Sales Budgets
Management plan for the expenditures to accomplish sales goals 6
Factors affecting sales forecasting
External Factors
• Relative state of the economy
• Direct and indirect competition
• Consumer earnings
• Demographics
• Population changes
• Weather

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Factors affecting sales forecasting

Internal Factors
• Labour problems
• Inventory shortages
• Working capital shortage
• Price changes
• Change in distribution method
• Production capability shortage

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Methods of Sales forecasting
• Quantitative
• Qualitative

Qualitative methods rely upon subjective opinions or judgments

Quantitative technique applies statistical methods.

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 Sales Forecasting Methods

Qualitative
Executive opinion method
Delphi Method
Sales force composite method
Survey of Buyer’s intentions
Quantitative
Time Series Analysis
Market Test Method

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Executive opinion method
• Method of combining and averaging views of several executives
regarding a specific decision or forecast.
Delphi Method
• Process includes a coordinator getting forecasts separately
from experts, summarizing the forecasts giving the summary
report to experts
Sales force composite method
• Also known as “Grassroots Approach” Individual salespersons
forecast sales for their territories
• Individual forecasts are combined & modified by the sales
manager to form the company sales forecast.
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Survey of Buyer’s intentions
• Process includes asking customers about their
intentions to buy the company’s product and services
• Questionnaire may contain other relevant questions

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Quantitative

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Time Series Analysis
Make forecasts based purely on historical patterns in the
data. Different Components
1. Trend component
2. Cyclical Component
3. Seasonal Component
4. Moving Averages

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Market Test Method

• Particularly relating to new products

• Test provides data about consumers actual purchases
and responsiveness
• On the basis of the response received to a sample
market test, product sales forecast is prepared.

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Benefits of Sales Forecasting

• Better control of Inventory

• Staffing
• Customer Information
• Use for Sales People
• Obtaining Financing
Sales Budgeting
Estimating future levels of revenue, selling expenses,
and profit contributions of the sales function

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 Types of Budget

Sales budget
Projection of revenue from forecast unit sales

Selling expenses budget

Approved amount that the department will spend to obtain
the revenues projected in the sales budget

Profit budget
Merged sales budget and selling expense budget to
determine gross profit. 19
 Sales Budgeting Procedures
Identification
Development Formulation of
of Problems
Analysis of Sales Sales
and
Forecast Objectives
Opportunities

Specification
Presentations Completion of Determination
of Resource
and Review Projections of Sales Tasks
Requirement

Modification Budget
and revision approval

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 Planning and Forecasting

1. Number target
2. Efficiency

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Numbers

Category wise
Brand wise
 Sub brand wise
SKU Wise

Retail Environment

Distributor wise
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Planning
Trends
• Organic Growth
• Inorganic growth
• Past trends – 5 yrs, 3 yrs, 1 yr
• Compare apple to apple

Activations
• New product launches
• Additional schemes 23
Efficiency
Coverage
Outlet addition
Salesmen Addition
Go to Market
Stockist model changes
Consolidation
Human Resources
Salesmen training
Salesmen incentive earning
Team dynamics
Team incentive earnings

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Customization plan