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Sales Forecasting & Budgeting Guide

The document discusses sales forecasting and budgeting. It covers the purposes of sales forecasting, which include planning resource allocation and avoiding costs of over- or under-production. Short, medium, and long-term forecasts are used for tactical planning, budgeting, and financial implications. Qualitative and quantitative techniques are used for forecasting. Budgeting includes determining budgets, creating a sales budget, and allocating budgets to departments and salespeople.

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Jaehyun Peach
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425 views16 pages

Sales Forecasting & Budgeting Guide

The document discusses sales forecasting and budgeting. It covers the purposes of sales forecasting, which include planning resource allocation and avoiding costs of over- or under-production. Short, medium, and long-term forecasts are used for tactical planning, budgeting, and financial implications. Qualitative and quantitative techniques are used for forecasting. Budgeting includes determining budgets, creating a sales budget, and allocating budgets to departments and salespeople.

Uploaded by

Jaehyun Peach
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd

Sales Forecasting and

Budgeting
Chapter 16
16.1 Purpose (Why sales forecasting)
 Sales managers responsible
 Over-production and holding stock can be costly
 Under-production can be detrimental as sales opportunities might be
missed.

 To plan ahead, purpose of planning is to allocate company resources.


16.2 Planning
 Short-term forecasts; up to three months (use for tactical matter, general
trend of sales is less important here than short-term fluctuations)

 Medium-term forecasts; one year and ahead (most important in the area
of business budgeting)

 Long-term forecasts; three years and more (needed mainly for financial
accountants for long-term resource implications and generally concern of
BOD)
Affected other function planning consideration
as a result of the sales forecasts

Production
Marketing Purchasing

Forecasting

R&D HR

Costing
A conceptually based model of
judgmental forecasting
Level of forecasting

 International level
 National level
 Industry
 Company
 Individual product by product
 Broken down seasonally over the time span
 Geographically right down to individual sales person areas
+
Qualitative techniques

 Consumer / user survey method


 Panels of executive opinion
 Sales force composite
 Delphi method
 Bayesian decision theory
 Product testing and test marketing

Exam Q; (Jun 14, Mar 15, Mar 16, Sep 16)

Companies make extensive use of qualitative sales forecasting techniques to support


their business modelling. Analyse the main qualitative sales forecasting techniques
generally in use.
Quantitative Techniques

Time series analysis


 Moving averages
 Exponential smoothing
 Time series analysis

Casual techniques
 Leading indicators
 Simulation
 Diffusion models
 Computer software
Budgeting

 Purpose
 Budget determination
 The sales budget
 Budget allocation

Exam Q; (Jun 14)

Analyze the main components of a sales budget.


Purpose of budgeting

 An organization needs to budget to ensure that expenditure does not


exceed planned income
 Sales forecast is the starting point for business planning activities
 Profit = Sales-Cost
 Forecast is pessimistic
 Forecast is optimistic
Budget Determination

Sales Department Budget


The selling expense
The advertising budget
The administrative budget
Advertising budgeting methods

A. A percentage of last year’s sales


B. Parity with competitors
C. The affordable method
D. The objective and task method
E. The return on investment method
F. The incremental method
The Sales Budget
Budget allocation

The sales budget is a statement of projected


sales by individual salespeople.

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