A sales budgeting is a smaller budget that is part of the master budget of a business. The sales budget focuses only on the sales the business conducts and how much it is costing the business to produce the products or services for sale. The sales budget is developed to help the business plan the sales, communicate the needs of the production team, evaluate the sales and performances and control the expenditures.
List of Products or Services
A sales budget will have a detailed layout and list of each of the products or services offered in the business. This type of budget will show how much each product or service offered through the company’s product and service line is earning the business on a monthly basis. For example, the budget may have a single line per product and service, so the reader can easily find out how much the product is selling for, how much it costs to produce and how many quantities are being sold on a monthly basis. This type of sales budget should be updated and printed monthly, so executives can use the information for financial planning.
As mentioned in the previous section, the sales budget must show detailed information regarding the product or service. This includes the production fees. A product may cost a specific amount to produce, because it uses specific tools or supplies that may need to be imported. The production fees may also include labor cost, but whether or not it is included in the sales budget is up to the budget creators and executives. Services, such as website development and design, may not cost much in production but can be costly in terms of software programs or membership fees that need to be paid for the business to use specific design programs, for example.
Depending on the product or service being created by the business, it may be subject to testing before it hits the market for sale. For example, any baby toys or products that could be potentially dangerous to users must be tested to ensure it is safe to use for those who the product is designed for. Services must also be tested, as a website needs to be fully functional before it is launched and given to the user. Depending on the testing in question, it may require some additional fees, which needs to be included in the sales budget.
Maintenance and Updates
Once the sales budget has been completed with the relevant information, an accountant or sales manager must update the budget on a monthly basis to ensure that all figures and sales totals are truthful and accurate. The information is not only used by the sales manager to determine whether the budget is maintained, but also used by executives to plan ahead and make changes to the existing products or product line.
- financial report image by Christopher Hall from Fotolia.com