Professional Documents
Culture Documents
Sales Budget
Why a Sales Budget?
Benefits of Budgeting
a) Improved Planning: Action to be taken quantitative terms.
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Benefits of Budgeting
a) Improved Planning: Action to be taken is described in quantitative terms. b) Better coordination & communication: All departments have budgets which give future course of action interaction between departments. Eg. Increased Sales Increased Production Increased Finance Increased MIS / HR
Benefits of Budgeting
c) Control & performance evaluation Control & performance evaluation: Budgets outline objectives and responsibilities so performance evaluation and control is easy. Eg. Expense monitoring, d) Psychological benefits: Instills profit orientation / expense control / culture in organization
Types of Budgets
a) Sales Budget
Types of Budgets
a) Sales Budget Detailed Plan showing the Expected Sales for a Future Period . Developed based on expected revenue (Sforecast) Gives sales by geographically location / product service / sales people & customers First part of Master Budget; Usually forms the basis for other operational budgets like finance & production.
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Types of Budgets b) Selling Expense Budget Salaries / Commissions Traveling / Entertainment Training (new products)
Types of Budgets
b) Selling Expense Budget Salaries / Commissions Traveling / Entertainment Training (new products) c) Administrative Budget & Profit Budget, Rent, Electricity, Office Furniture, Stationery GP = sales revenue sales expenses
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Types of Budgets d) Objective & Task: a), b), c) do not take cognizance of organizations objective in developing budget. Identify objective with employees Identify tasks for achieving objective Expenditure required Form budget e) Return Oriented Method: ROI, ROA, ROTA, ROAM (Assets Management)
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Successful Budgeting
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Successful Budgeting Involvement & Support of Top Management Support Budgeting & ensure all-round participation; should not be viewed as a pressure tactic but as an effective tool for performance; ii. Flexibility in Budgeting Should be adjustable to fast changing environmental conditions
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Allocation of resources Selecting salespeople, tools of sales, financial resources 6. Preparing the budget Balance between sales force capability and market opportunities 7. Approval for the budget
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Sales Forecasts
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Sales Forecasts
1. Market Potential: Maximum possible sales opportunities in part. mkt. segment, over a future period, assuring application of appropriate marketing methods. 2. Sales Potential: maximum possible sales opportunity for specific company in part. Mkt. segment over future period. MP : Total Industry SP : Part. Co.
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Sales Forecasts
3. Sales Forecast: In Re/Units, how much of a companys product can be sold over a future period, under a given marketing program on assumed set of external factors.
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Market Potential Analysis i. Market identification ii. Ability to buy iii. Willingness to buy Sources of Data: a) Secondary: Environment Analysis b) Primary: Customers spending patterns, preferences
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Analyzing Market Potential i. ii. Top down: Top mgmt. assesses market on basis of macro environmental data Bottom up: Micro enviro. factors of market like customer, products, ability to buy etc. are analyzed by lower management
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i.
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Judgment Methods 1. Delphi Technique: Systematic Method for obtaining consensus from a group of experts. Nominal Group Technique: Experts from diverse backgrounds Jury of Executive Opinion: Opinions of executives at top level, based on experience & utilization Lacks scientific validity senior most opinion prevails.
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Counting Methods
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User Expectations: Usually for industrial products by directly getting data from customers. Sales Force Composite: Estimate of expected sales from every salesperson; can over/under estimate, lack broader perspective. Market Tests: Limited area consumer acceptance.
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Quantitative Forecasts 1. Time Series Analysis: Estimation of future trends based on past performance; Long Term Forecasts Sales = T (long term variations C (cyclical variations) S (Seasonal changes) I (Irregular changes in environment)
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Quantitative Forecasts 2. Moving Average: Sales forecasts on sales of previous period: assumes environmental irregularities in past will be there in present.
(Sales t Sales t 1 Sales t 2 ....... Sales t n n
Sales t 1
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Quantitative Forecasts 3. Exponential Smoothing Refines (2) More weightage to sales in recent periods vis-vis older periods.
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Quantitative Forecasts
4. Regression & Correlation (Multiple Regression) Correlation: Degree of relationship between sales & other variables. Regression: Identify factor that influence sales & predicts changes in one variable due to changes in other. Most popular & widely used method Identifies relationship between sales and other independent factors on which sales is dependant.
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g)
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