INDIAN INSTITUTE OF

PLANNING AND
MANAGEMENT

PRESENTATION ON SALES MANAGEMENT

(SALES BUDGET)

BY: ABHISHEK SINGH

MBA
2nd SEM
 CONTENTS
INTRODUCTION

ROLE OF BUDGET

BENEFITS OF BUDGETING

PURPOSES OF THE SALES BUDEGT

METHODS OF BUDGETING FOR SALES FORCE

FACTORS OF SALES BUDGET

REQUIREMENT OF SUCCESSFUL BUDGETING

SALES VARIANCE

 INTRODUCTION

 SALES BUDGET:- A sales budget is a programme

designed for a stipulated time frame that highlights
the selling expenses and anticipated sales,
quantitatively and in value terms.
 This helps in making an objective estimate of net
profit on the selling operation.
 It is a statement aimed at comparing the revenue,
net profit, sales volume and the selling expenses
relating to a particular product or the entire business.
 ROLE OF BUDGET

 A budget is an organization’s operation plan for a

specified period
 It identifies the resources and commitments required to
fulfill the organization’s goals for the period.

 Budget is…
 a plan of operations.
 a basis for allocating resources.
 a communication and authorization device.
 a device for motivating and guiding implementation.
 a guideline for operations and gauge for controlling
operations.
 a basis for performance evaluation.
 BENEFITS OF BUDGETING
 Improved planning

 Better communication and

coordination

 Control and performance evaluation

 Psychological benefits
 PURPOSES OF THE SALES
BUDGET
 Mechanism of control
 Instrument of planning
Mechanism of control
Control is the primary orientation in sales budgeting.
The fundamental forces that keep an organization
together is through control systems. Controls typically are
defined as any process that directs the activities of
individuals toward the achievement of organizational
goals.
 Conti….

 Management is provided daily with details

of actual performance compared with
budgeted performance.
 It serves as an instrument for controlling
sales volume, selling expenses and net
profit.
 Instrument of planning

 The budgeting process requires complex sequences of

planning decisions.
 The sales forecast shows where it is possible for the
business to go.
 During planning planners determine from where it is to
where it wants to go.
 Budget planner calculate the expenses of converting
forecasted sales into actual sales.
 Sales planner formulate the sales plan so that sales
volume and net profit objectives are reached.
METHODS OF BUDGETING FOR
SALES FORCE
VARIOUS METHODS ARE

 AFFORDABILITY METHOD
 PERCENTAGE OF SALES METHOD
 COMPETITVE PARITY METHOD
 OBJECTIVE AND TASK METHOD
 RETURN ORIENTED METHOD
 AFFORDABILITY METHOD

Procedure used to set advertising

budgets, based on what the advertiser
thinks it can afford to spend. This method
lacks consideration for the objectives of
the advertising and how those objectives
can best be met. The advertiser may
spend less than necessary to achieve a
sales target or fail to provide the
necessary support to a new or declining
brand.
 PERCENTAGE OF SALES
METHOD

 Procedure used to set advertising budgets, based

on a predetermined percentage of past sales or a
forecast of future sales.
 This method of budget allocation is popular with
advertisers because of its simplicity and its ability to
relate advertising expenditures directly to sales.
 He method does not recognize that as conditions
change, advertising expenditures should change
with them.
 COMPETITVE PARITY METHOD

 Budget allocation for advertising based on the

expenditures of competitors. The practice is sometimes
called defensive budgeting or defensive spending,
because it is based on the idea that one should defend
against competition by spending as much (or as little) as
one's competitor on advertising
OBJECTIVE AND TASK METHOD
 Way of allocating funds to advertising based on the
desired results, the steps that must be taken to achieve
those results, and the projected costs of each
 SALES BUDGET
The manager should take into consideration the
following factors while preparing the sales
budget:-
 Past sales figure and trend
 Salesmen’s estimates
 Plant capacity
 General trade prospects
 Order on hand
 Proposed expansion or discontinuance of products
 Seasonal fluctuations
 Potential market
 Availability of material and supply
 Financial support
 REQUIREMENTS FOR SUCCESSFUL
BUDGETING
 Involvement and support of top management
 Flexibility in budgeting
Involvement and support of top management

 Top management looks not only at intrinsic merits but at the probable
value to the whole organization.
 It is safe to assume that top executive are at least partially ignorant of
the problems faced by the sales department.
 Starting point is a careful assessment of the wants and needs of the
prospects.
 Flexibility in budgeting

 Flexible budgeting is the subject of

considerable criticism because whenever
it is used plans must be made on the
basis of a wide range of probabilities.
 SALES VARIANCE

 Sales variance is the difference between the actual sales

and budget sales.
 It is used to measure the performance of a sales function
and to analyze business results to better understand
market condition.
REASONS
Actual sales can be vary from planned sales:-
Either the volume sold varied from plan
(sales volume variance)
Sales were at a difference price from what was planned
(sales price variance)
 For example:
The plan was to sell 5 widgets at $3
each, for a budgeted sales of:
(5*$3)=$15. In reality, 6 widgets were
sold at $2 each, for an actual sales of:
(6*$2)=$12.
The total variance was thus ($12-
$15)=$3 unfavourable or minus $3, since
total sales was less than planned.