 Is for a stipulated time

That highlights
 selling expenses
 anticipated sales,
 quantitatively and in value terms
 Aimed at

 comparing the revenue,

 net profits,
 sales volume and the selling expenses
relating to a particular product or the
entire business.
 The quality of sales force

 The size of the sales force

 All employees must be involved in the
process
 It should be practical and gain
acceptance in the organization
 Output must be linked with input
 It should be flexible to adapt to
environmental factors
 The management should be
continuously learn
 Fixed expenses:

E.g. compensation of sales persons,

office rent,
insurance and interest
on fixed assets like vehicles, office space,
office equipment, etc
 Performance related expenses:

Includes 
commissions,
incentives,
bonus and awards, etc.

 Activity related expenses:

Includes 
travel and communication expenses, etc.
 Sales Budget

 Selling expense Budget

 Administrative Budget & Profit Budget

 as a scale, or a yardstick, to measure
the performance/progress of a company

 strengthen or improve its performance

 to control the expenses along with net

profits

 Compare actual performance with the

budgeted performance
 Allocation of resources

 Planners to frame the policies for actual

market situations

 And many more……..

 Past sales figures and trend

 Salesmen’s estimates

 Plant capacity

 General trade prospects

 Orders on hand

 Proposed expansion and or discontinuance

of products
 Seasonal fluctuations

 Potential market

 Availability of material and supply

 Financial aspect
 Other factors:
 The nature and degree of competition within the
industry
 Cost of distributing the goods
 Government controls rules and regulations related
to industry and
 Political situation – national and international – as
it may have an influence in the market.
 Mechanism of control

 Instrument of planning

 complex sequence of planning decision

 forecast business to go where it wants to go
 so that both sales volume and net profit
objective are reached
 Also shows how the targeted volume can be
reached, while keeping expenses at a level that
permits attainment of targeted profit.

 Co-ordination
 Percentage of sales method

 by multiplying the sales volume budget

by various percentage of each category
of expenses

 Executive judgment method

 sales manager uses his judgment to

decide the budgeted selling expenses for
each category
 Objective and task method

 look at sales volume objective to be achieved

 Decide actions required to be carried out in

order to achieve the earlier stated objective

 to estimate the costs of carrying out of tasks.

 added up the costs then to find out whether

the profit objective can be achieved

 Review sales revenue

 1 Review situation

 2 Communications

 3 Subordinate budgets

 4 Approval of sales budget

 5 Other departments
Item January February March

Budget Actual Variance Budget Actual Variance Budget Actual Variance

Sales

Expenses

Salaries

Bonus

Medical

Retirement

Travel

Lodging
 Region East West North South

Product

Z
 Class Of a/c A B C

Product

Z
 EVERY budget proposal they make to
top management competes with
proposals submitted by other divisions.
 budget is presented to top management
just as a salesperson makes a
presentation to a prospect.
 How does the company, and incidentally
the top executive, stand to gain from
the proposed sales budget? (TOP
MGMNT)
 Individual items in each budget serve as
“quotas” or “standards”measures
performance
 NORMALLY done monthly but more
effective when weekly
 Shows the actual and the budgeted
sales and expenses
 Can be further broken down by product,
by package size, by sales territory or by
customer.
 The budget is not an end in itself,
merely a tool
 efforts is made to bring performance
into line with budget estimates
 unanticipated conditions revising the
budget.
 should not be changed too readily.
 If changed too much, it becomes a mere
record of sales and expense.
 Operating conditions differ from those assumed at the
time of budget preparation.

 Change in demand or expectations make a difference

 Overhead and certain other expenses do not vary

directly with volume, but some expenses such as
sales force commissions vary directly with volume.

 other expenses such as sales supervisory expenses

are semi variable, fluctuating with changes in volume,
but not directly.

 The budget may still be useful as a point of departure

in appraising performance, but there remains the
puzzling matter of determining how to allow for
changed conditions.
 Quite necessary

 sales forecasting methods are

misapplied or are inappropriate for the
budgeting situation

 Some companies use budgetary

procedures without definite forecasts

 “flexible budgeting” is the subject of

considerable criticism
 Sales budget is a statement of projected
sales revenues and selling expenses.

 sales volume objectives derived from

the various sales forecasts

 projected selling expenses are

determines by the different
organizational units
 sales and profit objectives

 items in the approved budget are

compared with actual sales and
expenses

 the sales budget is a composite of

quotas – for sales, profits and expenses
and is a valuable tool for control.