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Sales Budgeting andForecasting

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Definition Sales Budget

(a) Revenue goals

(b) Expense ceilings.

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Sales Budget- Basic Approaches

Top-down

approach.

Bottom-up

approach.

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Features & Objectives of

Sales Budget

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Sample Sales Budget

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Factors Influencing Sales

Budget Market size

Companys intention to curb selling

expenses.

Companys financial resources.

Market potential.

Sales potential.

Production efficiency.

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Steps in Determining Sales

Budget

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Methods of Determining Sales

Budgets Percentage of Sales Method.

Competitive parity method.

Objectives and task method.

What you can afford method.

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Percentage of Sales Method

Advantages Simple and easy to calculate.

Maintains balance between revenues and

selling expenses. Effective for stable marketing environment.

Disadvantages Lacks logic.

Percentages are subject to approximation.

Not applicable for new products.

Suicidal for fluctuating market situations.

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Competitive Parity Method

Advantages Comparatively a safe practice.

Reflects the collective wisdom of the

industry. Prevents marketing warfare.

Disadvantages Less practical as sales objectives and

problems of companies are different.

No assurance that competitors spending

policy is correct.

Inability to reach target customers

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Objectives and Task Method

Advantages Element of realism.

Flexible.

Periodic review of budgets possible. Disadvantages

Sales mangers need to posses sufficient

knowledge and wisdom.

Difficulty in understanding major sales

objectives.

Ignores past sales, forecasted sales and

competitors budgets.

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What You Can Afford Method.

Capacity to spend decides thebudget.

Advantages Simple, safe and flexible.

Disadvantages Lacks planning process.

Arbitrary discretion in deciding budget

levels.

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Sales Forecasting

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Objectives of Sales

Forecasting To decide on sales quotas and

territories.

To determine sales budget.

To attain proper control of inventories.

To set up performance standards.

To identify sales opportunities.

To research out sales and market

potentials of the firm.

To gather idea of the image of the

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Factors Influencing Sales

Forecasting Fluctuations in business environment.

Future state of the economy.

Political conditions of a nation.

Market characteristics.

Situational factors.

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Importance of Sales

Forecasting

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Approaches of Sales Forecasting Top-down

Approach

Bottom-up

Approach

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Methods of Sales

Forecasting Qualitative

Jury of Executive

opinions.

Delphi techniques. Sales force

composite.

Survey of buyers

intentions.

Quantitative

Moving average

method.

Exponentialsmoothing.

Regression

analysis.

Time seriesanalysis.

Econometric

models.

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