What is a Sales Budget?
Definition: A sales budget is essentially a projection of the amount of goods and services that a firm expects to sell in a given period.
The estimate includes figures for monthly as well as quarterly figures that the firm expects to make on executing a given sales strategy. The statement, in this case, comes with details on expected unit sales as well as a dollar amount.
Understanding a Sales Budget
A sales budget is at the heart of budgeting exercise. Depending on the size or nature of a sales budget, a company can be able to plan a manufacturing budget as well as an employee budget. Likewise, sales budgets differ from one company to another depending on the size of the operations involved, the market as well as products involved. For instance, a large company can aggregate its expected sales into smaller categories. The sales budget, in this case, will indicate expected sales per product categories as well as geographic regions.
When it comes to estimating sales for a given period, a company relies on data from various sources. Sales figures from the previous year or period are also at the heart of sales budget formulation. For instance, most firms provide sales estimates indicating potential sales growth from the previous period.
To achieve this, a business would have to sell more to the same customers or expand to other areas in a bid to target a broader target market. Likewise, a business may have to launch new products in a bid to indicate sales growth in the sales budget statement.
Sales Budget Format
Estimates provided by regional branch offices play a pivotal role when it comes to formulating a sales budget. In this case, companies rely on information from salespersons on the ground to estimate the total amount of sales likely to come into play in a given period. Salespersons interact with customers on the ground, thus likely to provide valuable information on what a company is likely to generate in the future.
The backlog of orders can also come in handy when it comes to formulating a sales budget. Orders pending at the end of a given financial year could form part of sales in a given period, thus an important component when it comes to estimating sales.
Similarly, senior managers must take into account a number of factors when it comes to formulating a sales budget. Ease of access to raw materials is one of the factors that a firm must consider when preparing a sales budget.
A shortage of raw materials or trained manpower can affect a firm’s ability to produce much-needed goods for sale. Likewise, shortages, in this case, can make it difficult for a firm to achieve its sales targets.
Sales Budget Example Template
When it comes to preparing a sales budget, it is important to itemize the number of units that a company expects to sell in one row and then list on another row the total amount expected depending on the units sold. The unit price per might be indicated even though it might change due to marketing promotions.
| XYZ Smartphone Company | |||||
| Sales Budget For 2020 | |||||
| January-March Quarter | April-June Quarter | July-September Quarter | October-December Quarter | Total | |
| Expected Number of Smartphone Sales | 4,000 | 5,000 | 6,000 | 7,000 | 22,000 |
| Price Per Unit | $100 | $100 | $100 | $100 | |
| Dollar Value of Sales | $40,000 | $50,000 | $60,000 | $70,000 | $220,000 |
Summary
A sales budget is essentially a financial document that indicates the number of units as well as the dollar amount that a firm expects to sell over a given period. Given that it is an estimate, it can indicate an increase in sales from a previous period or a decline in some instances.
Likewise, it is difficult to plot a sales budget that turns out to be accurate for any given period. That said adjustments should be made from, time to time-based on developments in the market scene.