Sales Forecasting Budget and Control

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UNIT 8 SALES : FORECASTING, BUDGET AND CONTROL
Structure
8.0 8.1 8.2 8.3 8.4 Objectives Introduction Sales Forecasting Sales Quotas 8.3.1 How Quotas Are Set? 8.3.2 Attributes of A Good Sales Quota Plan

Sales Budgeting
8.4.1 8.4.2 8.4.3 8.4.4 8.4.5 Purpose Methods Preparation Implementation and Feedback Mechanism Flexibility

8.5 8.6

Sales Control Methods of Sales Control
8.6.1 Sales Analysis 8.6.2 Marketing Cost Analysis 8.6.3 Sales Management Audit

8.7 8.8 8.9

Let Us Sum Up Key Words Clues to Answers

8.0

OBJECTIVES

After reading this Unit you should be able to : • • • • • • • suggest the importance of sales forecasting and sales quotas for territory management, describe some of the managerial issues concerning sales forecasting, explain the importance and types of sales quotas and how they are established, discuss some of the attributes of effective sales quotas, understand the importance of sales budget and control in sales management, examine methods and approaches used for preparing sales budget, and discuss various methods of sales control.

8.1

INTRODUCTION

In this Unit we will discuss the managerial practises related to sales forecasting and sales budget. A sales budget is a financial plan depicting how resources should be allocated to achieve the forecasted sales. The purpose of sales budgeting is to plan for and control the expenditure of resources (money, material, people and facilities) necessary to achieve the desired sales objectives that have been set on the basis of sales forecasts. Sales forecast and sales budget are intimately related. If the sales budget is inadequate the sales forecast will not be achieved or, if the sales forecast is increased the sales budget must be increased accordingly. Sales budget, by relating sales obtained and resources deployed, also acts as a means for evaluating sales planning and sales effort. It aims at attaining maximum profits by directing the emphasis on most profitable segments, customers and products/services. We will also discuss about the purpose and method of sales budgeting along with the flexibility in budgeting and sales control i.e. sales analysis, cost analysis and sales management audit.

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8.2

SALES FORECASTING

Sales forecasting is an estimation of projected sales for a time period. Simply speaking, the process of sales forecasting involves reviewing performance and history of the product or service and relating it to the marketing and sales efforts of the firm, within the anticipated market environment (economic, competitive, technological, public policy, etc.) and buyer behaviour. Sales forecasts are time span related and therefore termed as, short term forecasts – covering time period of upto a year or medium term forecasts – for a time period of around five years. The exact time period for which a forecast is developed is dependent on the product/market characteristics as well as the purpose for which it is developed and hence may vary from company to company. The longer the time span covered, the more qualitative will be the forecast and the shorter the time span covered, the more quantitative will be the forecast. Time series (trend fixing, moving average), customer/dealer surveys and executive judgement are the most commonly used methods for preparing sales forecasts. The selection of the appropriate forecasting method(s) depends upon (i) its purpose, (ii) availability of reliable and relevant data, and (iii) market conditions. For increased usefulness, the overall sales forecasts should be broken down by product, month, territory, geographical area and segment as per the needs of the company. Tourism sales forecasting is a highly specialised task which would be dealt in another course. The pay-off of sales forecasting lies in the accuracy of the forecasts made. Since the attainment of sales forecasts require the deployment of resources in its anticipation, the manager must do his or her best to make the...
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