In the name of Allah the most beneficent and merciful.
Sales Budgeting
Presentation by:
Gohar Majeed
Aitzaz
Abdul Haseeb Khan
Aamir Ayyaz
Zia ul Mustafa
Syed Muhammad Rizwan
Presentation objectives
Definition of sales budgeting
Use of sales budgeting by sales management
Explain major types of selling expense budgets.
Identification of steps of sales budgeting procedure
Actual sales budgeting practices
Budget:
Financial statement that outlines a firm’s intended actions and resulting cash flow statements.
Sales Budgeting:
Estimating future levels of revenue, selling expenses, and profit contributions of the sales function.
Zia ul Mustafa
Major budget categories
Major budget categories
Sales budget Selling expense budget
Budget categories
Sales budget: Projection of revenue computed from forecast unit sales and average prices.
Selling expense budget: Approved amounts that management will spend to obtain the revenues projected in the sales budget.
Allocating Sales Costs
Allocating Sales Costs
Fixed cost Variable cost Semi variable cost
Allocating Sales Costs
Fixed cost: Cost that don’t vary with output level and are incurred whether or not sales effort is made.
Variable cost: Costs that fluctuate directly with level of sales activity
Semi variable costs: Costs that vary, but not in direct proportion to sales volume.
Aamir Ayyaz
Major Selling Cost Categories
SellingCompensation( salary, commission, bonus, incentives)
Travel and entertainment
Prospect seminars
Discounts and Allowances
PromotionCooperative advertising allowances
Catalogs, brochures, price lists
Fairs and exhibits
Samples, models, displays
Selling aids
Major Selling Cost Categories
FulfillmentPackaging and shipping
Billing
Credit
Warranty
Returns
ServicingDistributor and customer training
Technical Counseling
Major Selling Cost Categories
SupportRecruitment and selection
Training and development
Sales meetings
Customer service
Warehousing
AdministrationOffice expense
Telephone and postage expense
Methods of funding sales force
1. Affordable Method2. Percentage of sales method3. Competitive parity method4. Objective and Task method5. Other methods• Bidding Method• Return on investment
Methods of funding
Affordable Method: Sales budgeting method in which management decides what share of revenues above and beyond the cost of goods sold it is prepared to spend on selling and administrative costs, after achieving a predetermined profit level.
Law of diminishing returns: Additional units of input will first produce increasing, then diminishing and finally producing negative returns.
Methods of funding
Percentage of sales method: Sales budgeting in which the funding level is found by multiplying sales revenues by a given percentage.Competitive Parity method: Sales budgeting method based on the competitive practices in an industry.Bidding System: Sales budgeting method in which functional areas compete on basis of expected payoffs.Return on Investment: Rate of return is determined by dividing net income by total assets employed to earn the income.
Syed Muhammad Rizwan
Sales Budgeting Procedure
Situation Analysis
Identification of problems and opportunities
Development of sales forecast
Formulation of sales objectives
Determination of sales tasks
Specification of resource requirements
Completion of projections
Presentation and review
Modification and revision
Budget approval
Tips for winning budget wars
Put things on holdDo not include new projects and venture in the budget during a slow businesses periodDo not try new, untested programsSet priorities and stick with them
Be RealisticIf cuts have to be made, make themShow management that you are willing to do your partIt is better for you to make the cuts then for someone outside the department to mandate them
Tips for winning budget wars
Be FlexibleIf management wants still more cuts, be prepared to bargainFind out what management thinks is most importantBe willing to compromise
Avoid ConfrontationTry to understand upper management’s point of viewDo not disagree with them on every issueRemember to save your best arguments for the really important projects.
Develop corporate mission,
objectives, and strategies
Develop corporate mission,
objectives, and strategies
Call for marketing plans
Call for marketing plans
Develop marketing objectives and
strategies
Develop marketing objectives and
strategies
Call for action plans
Call for action plans
Recommended sales and
marketing plans and resource
needs
Recommended sales and
marketing plans and resource
needs
Evaluate programs and alternatives
Evaluate programs and alternatives
Develop action programs
Develop action programs
Perform situation analysis
Perform situation analysis
Evaluate sales and marketing
plans and make tentative resource
allocation
Evaluate sales and marketing
plans and make tentative resource
allocation
Call for budgetsCall for budgets
Request functional and
developmental budgets
Request functional and
developmental budgets
Integrate, review and approve all
budgets and one year resource
allocation
Integrate, review and approve all
budgets and one year resource
allocation
Submit sales budgets for
approval
Submit sales budgets for
approval
Submit budgetsSubmit budgets
Coordinate, review and approve
budgets
Coordinate, review and approve
budgets
Develop sales budgets
Develop sales budgets
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Sales Budget ProcedureBudgeting cycle
Aitzaz Saeed
Advantages of budgeting
Advantages
Communicatingplans
Think about andplan for the future
Means of allocatingresources
Uncover potentialbottlenecks
Coordinateactivities
Define goaland objectives
Flexibility of sales budgeting
To increase the flexibility of budgeting process some firms have adopted other budgeting approaches.
Rolling budget
Flexible budgeting
Alternative budgeting
Flexibility of sales budgeting contd.
Rolling budget: Budget using periodic updates that eliminate the immediate past period; the budgets for the following period are modified as needed, and another period is added at the end of the cycle.
Flexible budgeting (contd.)
Flexible budgeting: A budgeting process in which a base budget geared to average conditions is drawn up and then adjusted in accordance with the actual sales results.
Flexible budgeting (contd.)
Alternative budgeting: Budgets based on envisioned best case, most likely, and worst case scenario in order to achieve emergency preparedness.
Abdul Haseeb Khan
Benefits of budgeting
a) All levels of management plan ahead.
b) Definite objectives for evaluating performance.
c) Early warning system for potential problems.
d) Coordination of activities within the business.
e) Management awareness of the entity’s overall operations.
f) Motivates personnel throughout organization to meet planned objectives.
Thanks