The first and most basic component of any operating budget is the sales budget, which lists the expected units and revenue expected from the sales plan. This budget may also be referred to as a forecast. Overall, the more accurate your sales forecast, the more effectively you can manage your business.
A good sales budget is crucial to small business success. Learn more about how to create one.
Components of a Sales Budget
All types of corporate planning require a multitude of spreadsheets. Just like large corporations, Small businesses will have many different spreadsheets used and created collaboratively. Ultimately, planning spreadsheets will all tie into the three basic financial statements a company uses to analyze and plan its business operations:
- Income statement: An income statement shows your company's profit and losses over a given period of time.
- Balance sheet: A balance sheet lists all of your company's assets, liabilities, and shareholder equity (if applicable).
- Cash flow statement: A cash flow statement lets you know how much money is coming in and going out of your business over a given period of time.
A sales forecast is often primarily used to build out the projected income statement for a business. There can be simple sales forecasts that focus just on the projected unit sales, or there can be more comprehensive forecasts that diverge from the income statement and include planning for variables. These could include items such as direct costs of goods sold and indirect costs of marketing campaigns.
Sales forecasts and budgets can take many forms and serve many different purposes.
The best starting point for any sales forecast or budget is a spreadsheet template or model that is built to meet the sales forecast needs. You can search online for many free and paid versions of these spreadsheet templates. Most can be integrated into Google Sheets or Microsoft Excel, so find one you feel comfortable using.
Some of the places you can find spreadsheet templates include:
The sales budget lays out a business's sales expectations for the coming accounting or budget period. It also attaches expected gross revenue to the sales plan, expressed in both units and dollars.
Smaller companies, with limited product categories and territories, may develop the sales budget for the business as a whole; larger companies, on the other hand, may aggregate the budget into product categories and/or geographic regions.
Sales budgets are usually prepared and presented monthly and quarterly, though some businesses may prepare them annually as well. That helps break down expectations into smaller periods of time as well as take a look at the bigger picture.
Many departments contribute to the sales budget, though the majority of input may come from the sales team, as they work with customers on a day-to-day basis. Marketing contributes to promotional information, which can affect both the timing and volume of sales.
Product managers may have insight into new product development and release dates, as well as the discontinuance of older products. The executive team may review and revise figures based on their own insights.
Planning for the sales forecast also typically includes some or all of the following considerations:
- The objectives (broadly stated)
- The goals (finite and measurable)
- A definition of your target market
- The strategies and tactics that may work the best and why
- Sales team quotas and motivations
The sales plan is static and not concrete or etched in stone. It is updated with new information as environments and inputs change. Overall, a sales plan can be a very important directional spreadsheet guiding the efforts of a business.
An Example of a Simple Sales Budget
Imagine a small business called ArtCraft Pottery for our example.
The following is the information for Q1 through Q4 for ArtCraft Pottery. The selling price per piece of pottery is $10. This forecast shows the sales budget for each quarter as well as the total for the year. These are forecast sales figures provided by the salespeople out in the field.
|Sales Budget for ArtCraft Pottery|
|Unit Selling Price||X $10||X $10||X $10||X $10||X $10|
In the example, we can see the year broken up into four quarters as well as the yearly total. The first row denotes the number of units expected to sell. The second row shows each unit's selling price of $10. The third row shows the budgeted sales, calculated by multiplying the number of units by the unit selling price.
- A sales budget lists the expected units and revenue expected from the sales plan. It may also be referred to as a "forecast."
- The best starting point for any sales forecast or budget is a spreadsheet template or model that is built to meet the sales forecast needs.
- The sales plan is static and not concrete or etched in stone; it is updated with new information as environments and inputs change.
Frequently Asked Questions (FAQs)
What can each department do to help with the budget?
In order to help, departments within the organization should ensure they communicate any factors that could impact the budget, which could include promotional items, new products, and more.
When is a budget reviewed?
As budgets are typically published monthly, quarterly, and/or yearly, they are often reviewed on the same timeline. However, they may pass through many departments and sets of eyes in order to ensure accuracy.
What’s a good format to follow?
When designing a sales budget, the format will largely depend on your own business's needs. You can find many free and paid templates online that can help you choose a format that works best for you.