SALES MANAGEMENT CHAPTER 3 LECTURE - 7 & 8 19TH NOV 2011

Compiled by T S Dawar Sales Management Lecture 7 & 8

Sales Budget
Who is going to sell, how much in what time, at what cost?

Compiled by T S Dawar Sales Management Lecture 7 & 8

BUDGET PURPOSES
Planning sales, expenses, territory Coordination Sales Staff Control organization, staff and expenses

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Consideration before making Sales Budget

Unit sales by sales territory Unit sales by month Unit sales by account Unit or rupee sales Forecasting Methods

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Sales Budget
Program 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 operations. In a real sense, it is a statement aimed at comparing the revenue, net profits, sales volume and the selling expenses relating to a particular product or the entire business.
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Sales Budget
A budget is a plan expressed usually in monetary terms. It is a process of allocating a portion of an organizations resources for its various activities for a specified period of time. It helps in planning and coordination of the organizations activities. Sales budgets are developed for the smooth functioning of the sales function.
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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.

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Cont.
They are Improved planning Better communication and coordination Performance evaluation Psychological benefits Avoiding uncontrolled expenditure.

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Cont.
Interlink Role
Marketing Plan

Sales Forecast

Sales Force Budget

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There are THREE

Types of Sales Expenses:

Fixed Expenses:

These expenses pertain to the compensation of salespersons, sales office rent, sales operational expenses, depreciation, interest on cost of assets like vehicles, office space, office equipment, etc. Performance-related Expenses:

These include commissions, incentives, bonus and awards, etc. Activity-related Expenses:

These include travel and communication expenses, etc.

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Types Of Budget
In practice, sales managers prepare three types of budgets Sales Budgets Selling Expense Budget Administrative Budget

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Cont.
Sales Budget

A sales budget gives a plan showing the expected sales for a specified period in the future.

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Cont.
Selling Expense Budget
Selling expense budgets details the schedule of expenses that may be incurred by the sales department to achieve planned sales.

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Cont.
Administrative Budget Administrative budget specifies the budgetary allocations for general administrative expenses that would be incurred by the sales department.

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IMPORTANCE OF SALES BUDGET Its importance can be gauged from the factors given below: It serves as a scale, or a yardstick, to measure the performance/progress of the company in terms of the performance of the sales personnel, regions, products, marketing channels and customers. It helps identify the areas in which the company needs to strengthen or improve its performance. It serves as an indicator to control the expenses associated with the sales activity and to keep a constant watch on the net profits of the company. It helps in comparing the actual performance with the budgeted performance and takes corrective measures if drawbacks appear or to follow the strategy Cont. NEXT SLIDE if the performance is good.Compiled by T S Dawar
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Cont from previous slide

IMPORTANCE OF SALES BUDGET Its importance can be gauged from the factors given below:

It helps the planners to frame policies for actual market situations and provides the platform to establish ways and means to get the business where they want it to be. It provides vital statistics to relate and dedicate the resources in an effective manner so as to realise the forecasted sales and convert these figures into reality.

It helps keep expenses under control so that by using scarce resources, the
objective of net profits may be achieved.

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Factors Affecting Sales Budget

The sales manager should take into consideration the following factors while preparing the sales budget: Past sales figures and trend Salesmens estimates Plant capacity General trade prospects Orders on hand Proposed expansion or discontinuance of products Seasonal fluctuations

Cont.

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Other factors The nature and degree of competition within the industry

Cost of distributing goods

Government controls, rules and regulations related to the industry Political situation national and international as it may have an

influence upon the market.

Potential market Availability of material and supply Financial aspect

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Methods For Budgeting

The different methods for budgeting include the Affordability method Percentage-of-sales method Competitive equality method Objective-and-task method Return-oriented method.
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BUDGETS SHOULD BE FLEXIBLE

Sales, costs, prices, or the competitions marketing efforts are some factors that may be higher or lower than expected.

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THANKS
END OF TODAY LECTURE

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