Sales budget - What is it? How is it prepared? and importance

sales budget

A document that shows the estimated sales at a given time.

what is a sales budget?

A sales budget is a document, expressed in quantitative terms, that shows the estimated sales for a given time. It comprises a fundamental matrix for a company since the financial and business planning will start from the said budget.

This document is characterized by being very objective and accurate in terms of future projections, which is why it helps to achieve the objectives of a company and obtain benefits.

In addition, the sales budget is an excellent tool in the management of companies because it allows knowing their future profitability. To achieve this projection, the number of goods and services that are estimated to be sold and their sale price are taken into account.

Objectives of a sales budget

When preparing a sales budget, you must be clear about its objectives:

• Know the profitability: determine how much can be sold to know if the business is profitable and, if so, obtain a good rate of return.
• Increase sales volume: Once profitability has been determined, the goal will be to increase sales and customers.
• Manage the competition: establish strategies to face the competition, either with some investment, reducing processes, or improving times.

How is a sales budget prepared?

The sales budget is prepared through the following steps:

1. Sales forecast: obtain an estimate of the number of sales made by a competitor in the sector during a season. Generally, the difference between the figures of previous years and the current real figures is compared.
2. Company sales forecast: make a forecast about how many stocks are going to participate in the market, based on the company's production capacity and other aspects such as marketing. Based on this, determine an estimate of the amount of stock to sell.
3. Capacity analysis: analyze the real capacities of the company in order to achieve the objectives set out in the sales budget and to be able to determine problems, opportunities, challenges, production capacities, supply, personnel, raw materials, etc.

Importance of a sales budget

A sales budget is essential for a company since it influences the decision-making of all the departments that comprise it.

This document indicates what is estimated to be sold, for which the product must be adjusted to its figures.

In addition, companies today usually base the vast majority of their decisions on the sales budget since, through it, it is possible to know if sales are high in order to prevent the exhaustion of the product supply.

 

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