The Sales Budget
The sales forecast provides the framework for the detailed planning presented in the master budget of an organisation. Based on planned strategies and its best business judgment, management converts a sales forecast into a sales plan through the commitment of resources and the establishment of control mechanisms. The sales budget provides an evaluative tool by presenting monthly indexes of volume of units and returns as hard targets for the sales team. Deviations from these indexes indicate to small business owners and managers where they need to adjust their efforts to take advantage of hot products or to remedy difficult situations. Management determines its sales policies and strategies within its ability to respond to customer needs, technological changes, and the financial prerequisites of marketing. The sales budget projects that portion of potential sales the sales team believes it can achieve. The forecast, then, sets the parameters on the top side while the production capacity and sales acumen of the team sets the floor. Although sales forecasts may accurately project significant changes in market conditions, a company needs to thoroughly examine its own resources to determine its ability to respond to these changes. A huge drop in demand may decrease the strain on the production process to where a company regains cost efficiencies, or a large increase in demand might be required by a company that needs cash for other projects. The sales budget, therefore, is predicated on a company's ability to meet expected demand at or near its maximum profit potential. Sales Forecasting
Sales forecasting on the other hand is the prediction of the future sales of a particular product over a specific period of time based on past performance of the product, inflation rates, unemployment, consumer spending patterns, market trends, and interest rates. In the preparation of a comprehensive marketing plan, sales forecasts help the marketer or manager...
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