2. Purpose

Sales budget serves two purposes – it is a mechanism
of control and an instrument of planning.

Budgets clearly define the resources require for
performing activities that help an organization achieve
its goals and act as an effective tool for controlling firms
performance.

Should be developed by those responsible for
achieving the stated objectives.

Generally a firms budgeting process depends on the
revenues it has been getting.

3. ….it is a Mechanism of control

Controlling and planning are inter-linked and one is
useless without the other.

Budgeting in itself is a controlling process.

It emphasizes on controlling the deviations.

4. …is an instrument of
Planning

Is the process of determining a future course of
action for helping employees trend a path.

Forecasting sales, scheduling the production
process and budgeting the expenditure for the
organization are part of planning.

Should be followed diligently by all.

5. 
For budget to act as an effective planning tool,
they must be developed very carefully by
following certain steps – assessing the previous
years financial performance, connecting the
current years expenditure and programes with
long term strategies, developing short term
activities to achieve long term activities and finally
communicating plans to all those concerned.

The next step is to identify the best ways to
achieve these goals and to assess the
expenditure that will be so incurred.

6. Benefits of Budgeting
1) Improved Planning --
It enhances the quality of planning as it
describes the actions to be taken in
quantitative terms.

Although budgeting process can only guide
the firm to follow a path that will lead to
profits, it definitely helps improve planning.

7. 2) Better Communication and Co-ordination—

As budgeting gives the future course of
action in quantitative terms for functions like
sales, production, personnel tec.., it forms
the basis for co-ordination within the
organization.

8. 3) Control and Performance Evaluation--
Any deviation from the plan can be easily
identified by conducting periodic reviews.

This will help the management to take
necessary steps to rectify the situation.

9. 4) Psychological Benefits--
Budget instills a sense of profit
consciousness in employees.

Budgetary controls remain in the minds of
sales personnel and encourage them to
achieve the sales target with the least
possible expenses.

10. TYPES OF BUDGET
1) SALES BUDGET

Is a detailed plan showing the expected sales for a
future period.

It is developed based on expected revenues from the
sales.

It is the first part of master budget and forms the budget
for the basis for other operational budgets like finance
and production budgets.

11. 
2) SELLING EXPENSE BUDGET

Is a plan that gives expenses that would be incurred by
the sales department to achieve the planned sales.

These expenses could be salaries or commissions,
travelling and entertainment expenses.

Allocating a percentage of sales.

Cost incurred in training a salesperson when a new
product line is added should be included in the selling
expense budget.

Finally this must be closely linked with the Sales Budget.

12. 
3) ADMINISTRATIVE BUDGET AND
PROFIT BUDGET

It comprises the budget allocation for general
administrative expenses such as rent, electricity, office
furniture, stationary and other costs incurred by the
sales department.

In profit budget, the gross profits are calculated by
deducting the sales expenses from the revenues
generated by the sales department.

13. METHODS OF
BUDGETING

1)
2)
3)
4)
5)
Different types of methods are:
Affordability
Percentage of Sales
Competitive Parity
Objective and Task
Return Oriented

14. 1) Affordability method

Is a process where the management develops
the sales budget depending on its ability to
spend on sales functions.

Here a firm develops the budget based on
whether it can afford to spend a certain amount
for selling it goods.

15. 2) Percentage of Sales

Is used for developing by multiplying sales
revenue by a given percentage.

The sales revenues used may be a past sales
revenue figure or a forecasted figure.

Sometimes, even a weighted average of the two
is used.

16. 3) Competitive Parity

In this method, the sales manager sets the
budget based on the budgeted figures of the
competitors or the industry average.

The budget is based on a comparable base size and revenues.

17. 4) Objective and Task

The management develops the budget the
budget based on the objectives to be attained.

Involves 4 steps :
1.
2.
3.
4.
Identification of objectives of the sales department.
Next, the tasks to be performed for achieving the
objectives are specified.
Third step involves determining the expenditure required
for the tasks.
Fourth step involves adding all the above expenses to
arrive at a final figure for the purpose of budgeting.

18. 5) Return Oriented method

The methods like return on investment (ROI),
return on assets (ROA), return on total assets
(ROTA)return on asset managed (ROAM) are
some tools that help managers to develop a
sales budget.

It helps the sales managers analyse the impact
of a particular sales cost allocation on
revenues and profits generated by sales.

19. Procedure for developing a
sales budget
1)
2)
3)
4)
5)
6)
7)
Review and Analysis of situations
Identifying Specific Market Opportunities and
Problems
Sales Forecasting
Communicating Sales Goal and Objectives
Preliminary allocation of resources
Preparing the budget
Getting Approval

20. 1) Review and Analysis of
situations

Involves collection of past data pertaining to
the company’s budgets for previous years
and identifying any variations between
planned and actual performances.

This helps in taking necessary precautions in
developing the current budget.

21. 2) Identifying Specific Market
Opportunities and Problems
 Opportunities
and Problems that
confront the sales management can be
assessed from situational analysis.

22. 3) Sales Forecasting
Forecasting is done product –wise,
client-wise and territory-wise.
 Is done for both, unit-wise sales and
rupee-wise sales, so that deviation can
be easily identified.


23. 4) Communicating Sales Goal and
Objectives

After sales forecasting, the next important
step for sales manager is to communicate
the goals and the objectives to the sales
department.

By encouraging them to participate in the
development, a sales manager can obtain
mutual agreement on them.

These objectives should be prioritized.

24. 5) Preliminary allocation of
resources

Resource allocation starts from selecting
salespeople, assigning tasks to them, giving
salespeople sufficient tools and most
important, enough financial resources to
cover their expenses.

25. 6) Preparing the budget

Sales budgets have to be prepared by
striking a balance between the potential of
the sales force and the true nature of market
opportunities.

It should be flexible.

26. 7) Getting Approval

In the final step, the sales department
seeks approval of the budget prepared.

Once the budget is prepared it may
need modifications owing to
environment changes.

27. SALES AUDIT

An Audit is a periodic review of a business
activity.

It lets the auditor identify problems and
concern areas, if any.

A sales audit, also known as sales force
management audit, is a cross functional
exercise that evaluates the entire selling
operation in a company.

28. 
A sales force management audit covers the sales
management environment, sales management
organization evaluation, sales management
planning system and sales management
functions.

Evaluation of the firms sales force management
process helps the sales manager improve
performance of sales force and effectively
allocate resources for achieving the sales
objectives.

29. Elements of Sales Audit
1)
Sales Management Environment
2)
Sales Management Planning System
3)
Sales Management Organization Evaluation
4)
Sales Management Functions

31. 1) Sales Management Environment

It involves the study of intra organizational and
extra organizational factors that affect the sales
management policies and practices of a firm.

Intra organizational factors help to ensure that
the sales department objectives are in
consonance with the overall objectives of the
firm.

32. 2) Sales Management Planning System

The focus of the sales audit is on the objectives
of the sales department, sales management
programme and its implementation.

The auditor examines the compatibility of the
sales department’s objectives with those of the
marketing department and the firms overall
objectives.

The sales management program is audited to
identify strategies adopted by the sales
department to achieve its objectives.

33. 3) Sales Management Organization Evaluation

This involves evaluating the competence of
sales managers and sales representatives
and recommending appropriate measures
to improve the sales team’s effectiveness.

The appropriateness of the programmes is
also examined by the auditor.

34. 4) Sales Management
Functions

It involves in depth verification of various
aspects of sales management such as
recruitment and selection, sales training,
compensation and expenses, motivation,
sales forecasting, budgeting, quotas, sales
territories, sales and cost analysis,
profitability analysis and sales force
evaluation.