A sales budget is a tool that allows you to calculate the profitability you can expect from your business for a product or service you sell during a specific period of time.
The purpose of a sales budget is to estimate how much profit you will make when a product you sell is released to the market. The profit calculated on sales of that product can help you determine the resources you will use to support those sales, and as a bonus, it will be possible to monitor and improve the performance of your sales team.
As you reach your budgeted sales estimates, you'll know if your sales process is optimal or has room for improvement. And of course, the more profit you make from those sales, the greater the profitability and overall health of your business.
What is the purpose of making a budget?
The objective of making a budget is to have a detailed report that allows you to have visibility of a financial project and the amount of money it can generate if carried out successfully, in addition to giving you detailed information that will allow you to make decisions to improve it.
In the specific case of a sales budget , the number database objective is to know the possible profits that we will obtain when selling a product or service, improve the management of the resources that we use when selling, detect adjustable costs or expenses and refine our strategy in order to improve our sales.
When a company develops a sales budget with as much information as possible, it will not only have a detailed financial tool to calculate profitability, but it will also be able to set goals for its sales team that will allow them to act with better direction.
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What is the difference between sales budget and sales forecast?
The difference between a sales budget and a sales forecast is in the moment when you make each one; while the sales budget arises at the beginning of sales planning and contemplates an entire period of time, the sales forecast is prepared on the fly, with real data from sales already made.
The objective of both is also different. The sales budget is made to keep the profitability of the products or services you will sell visible, while the forecast details how many of those sales you will complete and in how much time.
Although it is possible to make a sales forecast in the early stages of sales planning (or even as part of the sales budget ), the reality is that for the forecast to be more accurate, its calculation needs to be fed with real information from the period to be measured.
Let's put it this way: Your sales budget might state how much you expect to make over an entire year by selling a product, while your forecast will tell you, after calculating the sales for the first three months, how likely it is that you'll actually reach that profit by the end of the year.
Sales forecasting is a complement to any sales plan and, of course, supports the execution of the sales budget . The more accurate your forecast calculations are, the better the strategic decisions you can make around them.