Preparing the Sales Budget of the Companies

A sales budget is the primary budget, the most basic component of any operating budget, and the cornerstone of the budgeting process, and if it is prepared accurately, the rest of the budgets will be a high degree of accuracy, and therefore all possible factors for sales forecasting must be examined accurately 

Sales budget is a financial plan during the budget period, and it is in the form of reports for sales quantity and expected revenues for each product, determining the sales territory, tracking budget expectations with actual results, knowing the causes of variances and treating them, the sales budget involves many parties.

First, The Sales Department

The sales department is, of course, the primary responsibility for sales budget data and details, as it prepares preliminary budget estimates, but the rest of the departments participate with it in examining these estimates and adjusting them in line with their potential so that representing the final estimates in the sales budget and achievable targets in the light of available resources for each department, there are some factors for sales forecasting:

Sales Trend Analysis 

The sales department determines the relative importance of each marketing zone and the activity of companies or sales agents

It means creating market research and has experience of places that are possible sell their products in large quantities, in the sense that the particular product is desired by the merchants and customers in this region, for any reasons such as weak the products of competing companies and the lack of acceptance of them in the region or the high prices of their products compared to the company's products, the seller relationships, and sales reps, and vice versa, if the amount of sale of some of the company's products in another region decreases due to the high prices of its products in this region compared to the prices of competitors, or the absence of vehicles to transport goods to the agents in the region, or the agents are having credit futures contracts with competitors

In the sense that the sales department provides a report on the reasons for the rise or fall in the expected demand for the company's products in the different regions

It also determines regions that require additional efforts to activate sales by increasing advertising and providing human resources in these regions, as well as trying to increase the sales of the company's quantity by increasing credit to customers or signing contracts with them to increase the sales quotas and also the company's ability to advertising for its products

Also, the role of the sales department is to study the economic conditions of the market and the market’s ability to absorb the company's products during the budget year, this is the duties and responsibilities of the marketing and sales department according to the situation

In the sense that, for example, in the steel field - the company, according to its market research, expects a big real estate boom, given, for example, to the decline in land prices, or the government offering new lands for construction, it means increasing demand for construction materials products such as steel and the company expands by opening branch offices and sales outlets

It is necessary to take advantage of this boom and to increase its sales and vice versa of course in the case that the market demand for products in general is expected to decrease.

Product Assortment (Product Mix)

If you notice in most consumer goods that the company is making of each product, a group of different products in size and thus different in this price so that it can sell to all market segments and increase its sales

In the sense that, the soft drink companies can sell a family size bottle of LE12, and a smaller family size bottle of LE7 

It has a bottle of LE3 and plastic boxes for travelers of LE5 and of LE4 smaller size, why is it doing this? To sell for all segments of society

Assortment strategy is very important in the sense that it is preferable to add new goods to the current group of goods and determine - the adjustments that must be made to the design of other goods to meet the needs of the market, which will be in light of the company's production capacity and the possibility of marketing through the company's sellers or sales agents

Setting the selling prices that compose it the assortment strategy to suit all consumers and setting the selling prices in light of various factors such as the general price level and the prices of competitive and alternative goods and studying the relationship between the changes in production volume and the costs and profits for each goods.

The Finance Department

The role of the department is to provide data on sales from the company's books for the previous periods, such as the amount of sales for each product separately, the sales territories for each product and the selling prices for each product in each region after taking into account the cost of transportation in some goods and also analyzing sales trends of the products in the sense of whether the sale of a specific product increases in a certain period/ region for any reason, and decreases in certain periods for other reasons

And also the ratio of the volume of sales of each product separately compared to the total sales in each period and in each region to find out the required items in the region

To focus on them and also to know the slow-moving items and to know the reasons for or difficulty of selling down, and also to analyze the quality of sales in each region and whether they are cash sales or credit sales, and for example, after opening credit in this region, the amount of sales increased and is still weak

Also, the customer analytics in each region at the level of products, and whether the sale in each region done for a large number of customers or a small number of customers, and thus increases

The degree of risk that the company may be exposed to it in selling in this region as a result of any accident that occurs to the customer or conflicts happen between the customer and the company, so the sale transaction decreases, or the customer is selling below cost of the company in other regions, and whether the company selling to commercial companies, wholesalers, or retailers

And the percentage of sales for each type of customer and the volume of its sales, is it cash or credit, and the credit period granted to him

 In the sense of studying the assortment strategy to customers and that the company has the largest number of customers in each sales territory to prevent any risks that the company may be exposed to in the future

Also, if the senior management had a viewpoint in expanding the credit sales to increase the amount of sales, and thus the finance department, its role would be to determine the credit value in the company and determine the maximum credit period to have enough liquidity to cover its liabilities

The sales from their books - through the accounting software, and this is the role of the finance department in preparing the sales budget (preparation of analytical reports).

Production Management for the Factory 

There must be a balance between the sales volume required and the role of the production management is to determine the quantities that it can produce during each period according to the production capacity of the factory and according to the amount of raw materials that the company can provide in each period and also whether will good workers be provided to produce the required quantity and amount of manufacturing overhead, and whether the procurement department can provide it at the required times and the capacity of machines and equipment to produce the planned required quantity.

Sales Budget into Practical Reality

Budgets are often created using Microsoft Excel or good accounting software, so that it has flexibility in its work and has sufficient ability to make any modifications

First, we will have a sales budget are frequently divided into quarterly 

Of course, it is divided into the finished products group, divided into a group of regions, and also divided into periods, each period is quarterly

By the quantities and values ​​of each product separately, taking into account the changes in prices in each quarter, according to the company's analyzes

Taking into account is also the cost of transportation in each region.

Second, A subset of sales budgets linked to the primary sales budget

Meaning there must be a monthly sales budget, in the sense that the quarterly budget is divided into a budget for each month separately, to can track and control the sales of each product, in each region, and in each period and compare them with the estimated sales each quarterly, so that if in any particular month, the sales were weak in any particular region or product, the reason is known and treated in a timely manner instead of waiting for the end of the quarter, thus, the monthly budget is very important in monitoring the variances early.