Question

What are the factors to considered while preparing sales budget.

Answer 1

1. Past Sales Figures and Trends: The record of past sales and their trend is the most reliable guide as to future sales, because the past performance is related to actual business conditions.
2. Salesmen's Estimates: Salesmen come in direct contact with customers. They are, therefore, in a position to estimate the potential demand of customers.
3. General Trade Prospects: General prospects of a particular trade or industry considerably influence sales.
4. Orders on Hand: Orders already booked by the firm are an important consideration in case of industries where production is quite a lengthy process.
5. Future Product Plans: Proposed expansion or discontinuance of particular products can have a considerable influence on future sales.
6. Potential Market: The potential market for the company's products can be judged through market research.
7. Seasonal Fluctuations: The effects of seasonal fluctuations on sales can be minimised by offering special concessions and off-season discounts.
8. Plant Capacity: Sales budget should be so formulated that the firm can achieve balanced production and make proper utilisation of plant facilities.
9. Availability of Materials: Adequate supply of raw materials and power must be taken into consideration before preparing the sales budget.
10. Financial Resources: Increase in sales beyond a particular level require additional capital. Therefore, sales budget must be kept within the financial capacity of the firm.