Sales Budget

What it is?
Estimation of expenditure for a particular operating period to achieve forecasted Sales. (Selling expenses) Sales Forecast is part of overall Sales Budget.
A sales budget is a valuable tool that gives a direction to a company with regard to its targeted sales. It helps to improve the profitability of a company. The company makes a financial plan with regard to the amount of goods and services that it plans to sell in a year and the price at which the goods and services are to be sold. This plan is its sales budget.

Components of Sales Budget Sales Forecast Promotion Expenses Incentives projections Apportioned remuneration element of Sales Force

Sales Budget
Top Down Budgeting

Top Management sets spending Limit

Selling effort is fitted is customized to Achieve maximum in given limits

Sales Budget
Advantages of Top Down Budgeting Very affordable Full control of Management Clearly Defined limits Disadvantages of Top Down Budgeting Very rigid Limits scope Autocratic and frustrating

Sales Budget
Bottom Up Budgeting
Budget Approval by Top Mgmt

Cost element is calculated

Sales Activities are planned

Sales objectives are set

Sales Budget
Advantages of Bottom Up Budgeting Very flexible Unlimited Scope for Sales Force Very participative from point of view of Sales force Disadvantages of Bottom Up Budgeting Very expensive Management cant exercise full control Possibility of going awry

Process of sales budgeting

Procedure
Situation Analysis Identification of problem & opportunity Development of sales forecast Formulation of Sales Objectives Determination of sales tasks Specification of resource requirement Finalization of projection Presentation & review Revision of sales Budget

Approval of Budget

Types of Sales Budget

Selling Budget
Compensation Travel n Entertainment Prospect Seminar Discount & Allowances

Servicing
Distributor & Customer traveling Technical Counseling

Support
Recruitment & Selection T&D Sales Meetings Customer Services Warehousing

Advertising & Promotion Budget

Media Catalogues Fairs n Exhibition Samples, Models, Displays Selling aids Contest & Deals

Fulfillment
Packing & Shipping Billing Credit Warranty Returns

Administration
Office Expense Telephone & Postage

Sales Quotas
What it is? These are quantitative objectives assigned to individual sales units. It comprises of Sales volume as well as budgetary allocation. A sales quota is a part of a companys total estimated sales assigned to a salesman / territory / branch / distributor /dealer or to some other selling unit, as a goal to be attained in designated future period of time. Why use Quotas?

Provides a uniform comparison of individuals throughout an organization

Provides performance targets

Provides standards Provides control Provide as a tool to change the direction of the sales force

Sales Quotas
What makes good Quotas
Fair to all people involved Based on solid facts and not on assumptions Understandable Accurate

Attainable

Sales Quotas
Different Types of Quotas
Sales Quotas Expense Quotas Profit Quotas Activity Quotas

Combination Quotas

Objective behind Sales Quota

To provide quantitative performance standards To obtain tighter sales & expense control To motivate desired performance Sales Contests Others:
To obtain more effective budgetary control. To ensure systematic individual sales achievement to cope with the sales forecast To maximize sales in physical & in monetary terms To ensure a systematic & rational physical distribution of goods

Compensating the Sales Force

Compensating the Sales Force

It refers to the monetary & Non-Monetary expenses incurred by the sales organization, for paying the services rendered by the sales force. It is, thus, the total [payment including monetary (Salary & Wages) & Non-Monetary (Welfare Expense)

Importance of Compensation
Attract efficient & desirable Sales People Keep sales force satisfied Retain Sales Force Maintain good relation b/w employer & employee Correlating Sales Costs & Sales Results

Compensation Methods

Straight salary or wage

Salary plus commission Straight commission

Quota-bonus plan

Commission with draw

Characteristics of Sound Compensation

Simplicity Fairness Incentives Flexibility Control Guaranteed Income Economical to administer Help to attain objective Competitiveness

Performance Evaluation
It is done to assess the weakness & strength of the sales personnel & also the companys policies, objectives & methods employed by the top management

Management Cycle or steps of evl

Establishing performance Standards Recording actual performance Evaluating actual against standards Taking appropriate action