Work on the Sales Budget

Activity to evaluate Module II corresponding to the course

Business Budget.

For
T.S.U. Ulises Alberto Pineda N.
V- 9223585

National Experimental University of the Plains

Westerners
Ezequiel Zamora
Public Accounting Degree
San Cristóbal, February 2021
 Introduction

The sales budget is a document expressed in quantitative terms that presents a

estimation of sales and thus allows to know the profitability of the company. It is the

starting point of other budgetary systems of the company, so it is important to make

A good sales budget, any error can invalidate the entire planning task.

Many companies make business decisions based on this document, which expresses it.

what is expected to be sold, as it influences the level of production, that is, if the company

If you expect to have high sales, you must decide to increase the level of production in order to

satisfy the demand. The sales budget is an important part of financial planning

and the business planning of any company. There is no doubt that it is prepared in the best way.

way can help achieve benefits and meet the company's objectives.
Sales budget

The sales budget is the fundamental matrix of companies, as it involves planning.

financial and business, are based on a budget. It is a document expressed in terms

quantitative, which shows the estimated sales over a certain period.

It is characterized by being a very objective and accurate document regarding future projections.

Helps to achieve the objectives and obtain the benefits of the company. It turns out to be excellent.

tool in the management of companies, as it allows to know future profitability.

To achieve this projection, the amount of goods and services that are estimated is taken into account.

seller and its selling price.

The budget is an essential part of the company's overall operational budget, therefore

that must gather clear and precise information for strategic planning. All budget

Sales must meet a series of fundamental characteristics:

Include a list of all the products or services that the company markets.

It serves as a guide for the sales objectives of the company.

Estimated sales should be valued based on the quantity, that is, number of

units and their economic value.

It must be flexible and elastic.

Importance of a sales budget.

A sales budget controls the financial resources allocated to sales objectives.

the company. It is the viewpoint to compare the behavior between actual sales and the

budgeted sales. The budget guides the company regarding how much money
they should allocate to sales distribution, and also in advertising and marketing. A

A sales budget that imposes realistic objectives will help the company gain profits.

The sales budget is the first step to preparing a master budget, which is the

budget that contains all the planning.

Si el plan de ventas no es realista y los pronósticos no han sido preparados cuidadosamente y con

accuracy, the next steps in the budgeting process will not be reliable, since the

Sales budget provides the data to prepare the production budgets,

purchase, sales expenses, and administrative expenses.

There are three basic steps to prepare a sales budget.

Estos pasos pueden ser modificados y ejecutarse en distintas formas, dependiendo de las

characteristics of the business and the skills of management.

Objectives:

The objectives of the sales budget:

Understanding profitability: The budget helps you to be clear about how much you can sell.

This will allow you to know if your business is profitable and obtain a good rate of return.

Increase sales volume: Once your profitability is determined, you should increase the

sales and customers.

Managing the competition: You should also consider this in your budget, strategies for

facing the competition either with some investment or reducing some process and improving the

response times.
Generate basic strategies: Without a sales budget, managers, supervisors, and

Base workers will not be able to develop the necessary strategies to make the year profitable.

After making the sales budget, a process can be carried out with all the staff.

from strategic planning, to turn the budget into something concrete and actionable. The

the budget allows for evaluating the resources needed and the cost of those resources in order to

achieve the established objectives.

If the sales budget has decreased compared to the previous year, managers must

find out how to use the resources that have been provided to carry out the work. In some

In some cases, it may be necessary to adjust the sales budget.

Improve cash flow management: Creating a sales budget is one of the keys

to improve the company's cash flow management. When sales are good,

It is possible to increase the marketing budget using a formula that links the increases in

the expenditure with the increase in sales.

Marketing expenses can also be increased gradually, so that in case it decreases the

sales volume, the sales budget can be reduced and thus maintain a margin of

benefit.

The sales budget also has a direct impact on the production budget.

because the production budget details how many products or services need to be produced

to achieve sales goals.

Set specific sales goals: A sales budget includes specific amounts.

sales targets that must be achieved, providing the work team with milestones that will help establish the

agenda for a month, a quarter, a semester, or a fiscal year.

When the sales staff understands the expectations placed on them, it is more likely that

work diligently to meet those expectations, especially if the sales manager

You can use those milestones to encourage the staff to achieve a greater accomplishment.

The sales budget also helps to evaluate the performance of the sales department.

for example, it may be discovered that revenues have increased, but so have costs

sales have increased, which means a lower profit margin. So it could be

determinar dónde realizar recortes en los gastos de ventas. Igualmente, se podría determinar si los

Sales team members are underperforming.

Help determine an expense overload: The creation of a sales budget

it also helps determine overhead costs. It allows for the evaluation of profit margins.

potential to establish the appropriate pricing strategies.

Some business owners include all non-production expenses in a

only one category of general expenses. Others divide general expenses into general,

administrative and sales. If a sales budget is used as a projection of the

income and expenses, this helps to plan all the other budgets, especially if it is created

each budget based on the projection of revenues.

Each company, depending on its characteristics and the market in which it operates, has a

own system regarding the responsibilities in the preparation and subsequent update of the

sales budget, the Marketing management, due to its knowledge of the projections

of the market, the behavior of the competition, and the management of future strategies of

marketing, and the Commercial Management, due to their direct knowledge of the current market, are the
jointly responsible for its assembly. Its final approval rests with the Board of Directors, which, upon

it is about long-term projections, approved without major discussions.

Sales from the past and their trends

Trends

Un análisis de las tendencias de ventas es una revisión de las mediciones relacionadas con las

sales or key performance indicators over a specific period of time. The period

can be short, medium, or long term. Sales trends can rise, fall, or

remain unchanged.

There are three types of sales trends that are significant for prediction purposes:

Secular trends (long-term): can be calculated by plotting sales data on a

moving average base.

Cyclical Trends: reflect the pressure of business cycles on sales. They are

important for long-term sales projections.

Seasonal trends can be determined by plotting monthly sales over several years.

For predictive purposes, sales trends are practically useless at times when

when economic trends change or when market conditions are changing

quickly. The likely continuation of a trend should be inferred from the logic of the

situation.

The greatest benefit that can be derived from a sales trend analysis occurs when

this is used together with a correlation analysis, evaluation of potential of

market and executives' judgments regarding competition, new products, advertising,

etc. hence the importance of this type of analysis.

The purpose of a sales trend analysis is to gain a better understanding of the

previous results in order to answer specific questions to solve problems of

businesses and/or to predict future performance.

Factors that affect sales projections

There are factors that can affect the sales forecast, which should be considered in

the planning process; these can be grouped into:

1. External factors.

2. Internal factors.

a. External factors are those uncontrollable factors that somehow affect the

sales, such as, for example:

Gross Domestic Product.

Per capita income.

Prices in a free market of supplies and products.

Purchasing power of the currency

Variations in the product offering in the market.

Government restrictions and incentives

Taxes.

b. Internal factors These are factors that can be controlled by the company and are:
Adjustments are adjustments to future estimates due to variations experienced in previous ones.

years. Of change in operations

What can be due to changes in:

El proceso de producción.

The combination of materials and labor.

The quality of the product.

The marketing and advertising strategy.

Of growth

They can be due to the increased prestige of the company and/or the products it sells and the

increase in operational capacity.

How is a Sales Budget prepared?

Select a period

Although it is common to use an annual sales budget, some companies have budgets

quarterly or even monthly sales.

Collect historical sales data

If the sales budget is made in an existing business, it should be possible to consult the

previous sales records. The sales data used must be from the same period

prior to the budget that is being prepared.

For example, if you are working on a budget for the upcoming spring quarter, you

They use data from a previous spring quarter to minimize the effect of the factors.

seasonal variations in sales.

Locate sales of the industry in external sources

Real sales data can be obtained from annual and quarterly reports of the

public companies. However, that information will only be

available for large companies.

The Bureau of Labor Statistics can provide growth estimates and other data.

important financials about the industry.

The local chamber of commerce can provide information about local companies and put it in

contact with industry colleagues.

Compare sales with past periods

For example, count the number of salespeople working for the company and compare it with

past sales periods.

If the number of sellers has increased or decreased, the must increase or decrease the

estimated sales amounts accordingly.

Request the sellers for their own personal projections for the next sales period.

Undoubtedly, your knowledge and firsthand experience can help make it happen.

accurate projections.

Investigate current market trends

Although past sales provide a good starting point for the budget, performance

the past does not always predict future outcomes. If market trends are changing, then

it is more likely that they will also affect the company's revenue.

For example, if the company makes plastic cases for CDs and CD sales are declining,

It is possible that sales estimates will also need to be reduced.

Talk to customers and sales staff

The intention to purchase products is a strong indicator of future sales. If customers

they tend to buy during certain periods of the year, this trend must be taken into account in the

sales budget.

Sales representatives have key information about customer concerns. This

future performance.

Marketing provides information about sales promotions that could affect sales.

It also informs about dates for the introduction of new products, as well as withdrawal dates.

old products.

Create budget

Based on previous sales, the current state of the market, the strength of the staff

from sales, the specific production capacity and customer trends, the best will be made

sales estimation for the upcoming budget period.

The basic calculation is to detail in a row the expected number of sales in units. Then it

lista en la siguiente fila el precio unitario promedio esperado, y los ingresos totales en una tercera

line.
The unit price may be adjusted for marketing promotions. If discounts are anticipated

sales or returns should also be listed.

Compare actual results with budgeted ones

Once the projected sales period concludes, it will be seen how close the sales were.

projected in relation to the actual. Any variation found may help to prepare

future budgets with greater accuracy.

Example

Let's suppose that company ABC plans to produce a wide variety of plastic cubes.

during the fiscal year 2017. All these cubes belong to a single category of

product. Its sales budget is summarized as follows:

As can be seen, the sales manager of ABC expects that the increase in demand in the

the second half of the year allows it to increase its unit price from $10 to $11.
In addition, the sales manager expects the historical percentage of sales discounts to be

the 2% company of gross sales is maintained during the budgeted period.

This sales budget example is simple because it is assumed that the company only sells

a category of products.

Calculation methods for sales forecasting

There are many methods to calculate sales forecasting; among others, some are:

a. Statistical and mathematical method.

Least squares

Logarithmic

b. Method of personal criteria.

Sales and marketing staff.

Department of Marketing.

External consultants

c. Arithmetic method.

Percentage increase.

Absolute increase.

Moving average

Below are some of the cited ones analyzed.

METHOD OF LEAST SQUARES

The least squares method is a method used to project future sales.

periods based on sales from past managements.

Like any other, the least squares method must be adjusted in case there are

factors that change conditions and situations, both economic, political, and market

capacity, both external and internal.

For example, if the amount of sales in the previous five years was:

If one wishes to estimate sales for the next five years with the same trend, it can be done.

to resort to the least squares method.

Applying the least squares method, it fits to the line:

where:
Therefore, to substitute in these formulas, it is necessary to first determine:

Replacing in the formulas:

First of all in the formula:

In second place in the formula:

Thus, the line fitted by least squares is:

While the growth (c) is determined by the formula:

For example, the growth (c) for five years is as follows:

This means that sales will grow at an average of 4.8% per period.

Therefore, the estimated sales for the next five periods are:

Sales forecast for period 6

Sales forecast for period 7

Sales forecast for period 8

Sales forecast for period 9

Sales forecast for period 10

Therefore, the sales forecast for the next five periods is:

The projected sales graph is as follows:

SALES STAFF CRITERIA

En éste método participan los niveles inferiores de la organización.

The procedure is as follows:

The central sales office supplies the heads of the different districts.

Sales statistics from previous managements.

Description of sales policies to follow.

Installed capacity of the company.

The sales staff prepares a forecast of the future sales in the territory where they operate.

The forecasts presented by the sales staff are tabulated, reviewed, and evaluated by the

marketing manager.

The estimated sales are presented to the budget committee.

The feasibility of meeting the estimated sales is being evaluated.

The sales plan is distributed to the different departments.

CRITERION OF MARKETING MANAGEMENT

In this method, only the opinion and judgment of the marketing manager is taken into account, after a study.

de:

Sales statistics from previous managements.

Sales policies to follow.

Company's ability to meet forecasted sales.

For example, the marketing manager can forecast that the sales of the next

the period will be 10% more than the previous one.

If 10,000 units were sold in the previous year, it is estimated that next year it will sell:

Therefore, the estimated sales for the next period amount to 11,000 units.
COMMITTEE CRITERION CONSIDERING VARIOUS SUBJECTIVE FACTORS

When the committee considers several factors and these are evaluated and accepted by the members.

From the committee, there are increases and decreases on a basis, for example:

If in the previous management 100,000 units of product 'D' were sold, the factors that

wait will affect your modification are:

a. Due to the increase in population, sales are expected to rise by 10%, so the

estimated sales will be:

b. The decrease in per capita income will reduce sales by 4%, then sales

they will be estimated:

c. Due to a price reduction, sales are expected to increase by 15%, then sales

estimated will be:

Therefore, the estimated sales for the next period amount to 121,900 units.

PERCENTAGE INCREMENT METHOD

This method consists of:

a. Determine the percentage of variations of the different periods with respect to the previous one.
Determine the average of the variations.

Where:

For example, if the sales amount in the previous five years were:

As the percentage of variation is:

Then the percentage of variation based on the sales of the previous five periods will be:
The percentage increase from period 2 compared to period 1 is:

The percentage increase from period 3 to period 2 is:

The percentage increase from period 4 compared to period 3 is:

The percentage increase from period 5 compared to period 4 is:

The sum of the variations is:

As the average of variation is the sum of the percentages of variation divided by the

number of periods minus one.

With this coefficient, it is now possible to forecast the quantity of sales for the next five.

periods.

Considering that the sales in period 5 are 273.5 units, the expected sales for the

period 6 will be:

Considering that sales in period 6 will be 288.96, the expected sales for period 7

they will be:

Considering that the sales in period 7 will be 305.29, the expected sales for period 8

they will be:

Considering that sales in period 8 will be 322.55, the expected sales for period 9

they will be:

Considering that sales in period 9 will be 340.78, the expected sales for period 10

they will be:

In summary, based on statistics from previous periods and applying the incremental method

percentage-wise, the projected sales for the next five periods (sixth to tenth) are:

METHOD OF ABSOLUTE INCREMENT

This method consists of taking the average of the absolute variations, to which the result is

add the last execution.

For example, if the number of sales in the previous five years was:

The absolute variations are:

The average of the absolute variations is:

Therefore, the expected sales for the next five periods will be:

The sales forecast for period 6 is:

The sales forecast for period 7 is:

The sales forecast for period 8 is:

The sales forecast for period 9 is:

The sales forecast for period 10 is:

In summary, the sales forecast for the next five periods (sixth to tenth) is

following:
Sales Budget Example:

To start a sales budget, it is necessary to obtain a sales forecast, which is

sent to the sales department, for consolidation and subsequently its review and

approval, and with this information prepare the budget. Example

The Agroindustrial Company El Arroz wants to sell pre-cooked rice by units (quintals).

during a quarter, a sales forecast would be made considering its distribution

retail product, and having 6 salespeople who estimate their sales as follows:

Preparation of the sales budget:

Having the sales forecast for each of the precooked rice sellers at the step

first it is necessary to determine the price that the consumer is willing to pay and from that

way to prepare the sales budget.

According to the establishment of standard costs, the unit cost can be known.

product before production, and in this way be able to determine the profit margin

required according to the company's sales policies, thus managing to establish the

selling price.

In the example presented for the production of pre-cooked rice, the process used is

specific orders, for which the information on the standard unit cost is presented:
The formula to apply for preparing the sales budget is as follows:

Sales Budget = Expected sales budget (units) x selling price per

units

For this development example, the units to be sold are 148,100 quintals at a price of

$25.00 per quintal, the sales budget is as follows:

Practical case: Expenses on advertising, propaganda, and public relations and their payment

PROPOSAL

Accounting entries for expenses in advertising, propaganda, and public relations and their payment.

A company hires the services of an advertising, propaganda, and public relations agency.

public relations in order to launch a certain campaign and take certain actions to improve its image.

This service costs €15,000 plus VAT and will be paid by bank transfer.

the corresponding accounting records shall be made:

ACCOUNTING RECORD For the expense of advertising, propaganda, and public relations (VAT =

15,000 € x 21% = 3,150 €

For the payment on the agreed day:

Ejemplo de Gastos de ventas

An entity dedicated to the marketing of appliances acquired 200 televisions for the

Sale. The purchase price of each television is $833,000, VAT included at 19%. The entity

You must additionally pay $15,000,000 corresponding to fees.

The entity had to transport the inventory from the port to its warehouse, for which

incurred an expense of $9,000 for each unit of merchandise. Then, he paid $500.

additional for each unit, corresponding to the loading and unloading of the merchandise.

The cost of the inventory is as follows:

Purchase price including VAT ($833,000 x 200 units) $166.600.000

VAT 19% ($26.600.000)

tariffs $15.000.000
 Inventory transportation ($9,000 x 200 units) $1,800,000

Loading and unloading of merchandise ($500 x 200 units) $100.000

Total $156.900.000

To determine the inventory cost, the entity excludes the $26,600,000 corresponding

to the VAT on the products, because as this is a recoverable tax, you will be able to deduct it later

of the amount to be paid in your VAT declaration.

The $15,000,000 paid for fees are included within the cost of the

inventories, because they are a non-recoverable tax. In that sense, the tariffs are charged

as a higher value of inventory costs and the entity will be able to carry them to its

income tax declaration.

Regarding the amounts paid for transportation and for the loading and unloading of the goods,

They are also part of the inventory costs.

The entity makes the following entry in its accounting:

Tell Debit Credit

Inventories $156.900.000

Deductible VAT $26.600.000

 Accounts payable a $183.500.000

suppliers

Conclusion

In this work, the sales budget was explained, clarifying and conveying understanding.

its development and importance, it is highlighted that in due course it has been structured purely from

in a theoretical way, highlighting that there were concepts of mathematical origin. This work

it serves for the facilitation of basic theoretical terms, which, complemented with other works of
research where actions or activities in the accounting area can help with the

understanding of a practical implementation of a sales budget.

Bibliographies

Sales budget: objectives, how it is prepared, example - Lifeder

Sales Budget | Start Up SME

The sales budget - [Link]

Artículo: La venta profesional de servicios - La importancia del presupuesto de ventas

Sales Management: Sales Estimation

The sales budget - [Link]

Analysis of sales trends | Take care of your money

The Sales Budget as the basis of everything -

Sales budget - What is it?, how is it prepared? and importance

Business Administration: Sales Budget Preparation

The Sales Budget - Free Book

Why a training contract is such a good option and how it benefits both the worker

like the businessman

The sales budget as a management tool