SALES BUDGET ,FORCASTING AND

CONTROL

By:-
Jitendra Singh
Roll No. - 19
PGDM IV SEM
Sales Budget
A budget is a plan expressed usually in
monetary terms. It is a process of allocating
a portion of an organization’s resources for
its various activities for a specified period of
time.
It helps in planning and coordination of the
organization’s activities. Sales budgets are
developed for the smooth functioning of the
sales function.
Cont.
Developing sales budgets serve two
purposes –
As a mechanism of control and
An instrument of planning.
There are several benefits an organization
derives from budgeting.
Cont.
They are –
• Improved planning
• Better communication and coordination
• Performance evaluation
• Psychological benefits
• Avoiding uncontrolled expenditure.
Cont.
Interlink Role

Marketing Plane

Sales Forecast Sales Force Budget

Types Of Budget
In practice, sales managers prepare three
types of budgets –
Sales budgets
Selling expense budget
Administrative budget
A sales budget gives a plan showing the
expected sales for a specified period in the
future.
Cont.
Selling expense budgets details the
schedule of expenses that may be incurred
by the sales department to achieve
planned sales.
Administrative budget specifies the
budgetary allocations for general
administrative expenses that would be
incurred by the sales department.
Methods For Budgeting
The different methods for budgeting include
the-
Affordability method
Percentage-of-sales method
Competitive parity method
Objective-and-task method
Return-oriented method.
Sales Forecasting
Sales forecasting is a difficult area of
management. Most managers believe they
are good at forecasting. However, forecasts
made usually turn out to be wrong!
Marketers argue about whether sales
forecasting is a science or an art. The short
answer is that it is a bit of both.
Cont.
Market Forecast refers to the estimates of
future sales of a company’s products in the
market.
Sales forecasting is very popular in
industrially advanced countries where
demand conditions are always uncertain
than the supply conditions.
Reasons for undertaking Sales Forecast

Businesses are forced to look well ahead in

order to plan their investments, launch
new products, decide when to close or
withdraw products and so on.
The sales forecasting process is a critical
one for most businesses.
Cont.
• Key decisions that are derived from a sales
forecast include:-
- Employment levels required
- Promotional mix
- Investment in production capacity
Types Of Forecasting
• There are two major types of forecasting, which
can be broadly described as macro and micro:
• Macro forecasting is concerned with forecasting
markets in total. This is about determining the
existing level of Market Demand and considering
what will happen to market demand in the
future.
• Micro forecasting is concerned with detailed unit
sales forecasts. This is about determining a
product’s market share in a particular industry
and considering what will happen to that market
share in the future.
Selection Of Forecasting
 The selection of which type of forecasting
is use depends on the several factors which
can be described as:
(1) The degree of accuracy required – if the
decisions that are to be made on the basis of the
sales forecast have high risks attached to them,
then it stands to reason that the forecast should
be prepared as accurately as possible. However,
this involves more cost
Cont.
(2) The availability of data and information - in
some markets there is a wealth of available sales
information (e.g. clothing retail, food retailing,
holidays); in others it is hard to find reliable, up-
to-date information.
(3) The time horizon that the sales forecast is
intended to cover. For example, are we
forecasting next weeks’ sales, or are we trying to
forecast what will happen to the overall size of the
market in the next five years?
Cont.
(4) The position of the products in its life cycle.
For example, for products at the “introductory”
stage of the product life cycle, less sales data and
information may be available than for products at
the “maturity” stage when time series can be a
useful forecasting method.
The Relationship of Forecasting to Budgets

Relation Sales Forecasts

Sales Budget

Production Budget Sales &

Revenue Budget Administration
Direct Labor Budget Expenses Budget
Revenue Budget
Cost of Goods Sold Factory O/H
Budget Budget
Budgeted P/L Statement
Expenses
Budgeted Balance Sheet Budget
Purposes Of Short term Forecasting

• Appropriate production scheduling

• Reducing cost of purchasing R/M
• Determining appropriate price policy
• Setting sales targets and establishing
controls and incentives
• Evolving a suitable promotional program
• Forecasting short-term financial
requirements
Purposes Of Short term Forecasting

• Planning of a new unit or expansion of an

existing unit
• Planning of long-term financial
requirements
• Planning of man-power requirements
A common method of preparing a sales
forecast has three stages
1) Prepare a macroeconomic forecast – what will
happen to overall economic activity in the relevant
economies in which a product is to be sold.
2) Prepare an industry sales forecast – what will
happen to overall sales in an industry based on the
issues that influence the macroeconomic forecast.
3) Prepare a company sales forecast – based on
what management expect to happen to the
company’s market share.
Forecasting Process
Determined Develop Forecast
Forecast Objective independent and Procedure
dependent
variables
Select forecast
Analysis method

Evaluate Result
versus forecast
Total forecast
Procedure

Make & finalize Present assumption Gather & analyze

forecast about data data
Cont.
Forecasting can be classified into
qualitative forecasting and quantitative
forecasting. The methods used in
qualitative forecasting are:
• user expectations,
• sales force composite,
• jury of executive opinion,
• Delphi technique and market test.
Cont.
The methods used in quantitative
forecasting are:
• time series analysis
• moving averages
• exponential smoothing regression and
correlation
• analysis, and multiple regression models
Control
Control was defined as “a process used by
managers to direct, regulate, and restrain
the actions of people so that the
established goals of an enterprise may be
achieved.”
Revenue control is clearly an important
goal of sales control, but it is not the only
one.
Sales Control
 Like any other control system, sales control
requires the establishment of standards, the
evaluation of actual performance and the
correction of deviation in performance.
 Sales control implies not only managerial action
with regard to actual sales, but it also embraces
all other marketing functions required for the
even flow of products or services form producers
to consumers.
Cont.
 All promotional and auxiliary efforts in marketing
require as much control as the actual selling
efforts demand.

 Nevertheless, control of promotional and auxiliary

efforts in marketing is more difficult and cannot
be exercised with that exactness which is possible
in case of actual selling efforts.
Cont.
 Because of their intangible performances,
ancillary activities in marketing are placed under
some broad measures of control, and they are
measured and appraised by managerial
judgment, skill or experience.
 The basic tool for controlling these efforts is to be
found in the sales expense budget .
 For controlling performances of salesmen, the sales
budget or in the absence of a sales budget, the
sales programme provides the standard for control.
Goals of Sales Control
• Optimize number of sales
• Maximize profit
• Control revenue
Systematic View
Sales Control

Behavioral Aspects Cost Aspects

Sales Effort Allocation of Performance Sales-function

Selling-Time Expenses Administration