Determine important factors while praparing sales budget, Managerial Accounting

Determine important factors while praparing sales budget

The possible factors to be taken into account while preparing a sales budget are discussed as follows:

1) Past sales figures and trend: the record of previous experience from the most reliable guide as to future sales as the past performance is related to actual business condition. However the other factors such as seasonal fluctuation growth of market trade cycle etc., should not be lost sight of.

2) Salesmen' estimates: salesmen etc., are in a place to estimate the potential demand of the customers more accurately because they come in direct contact with them. However proper discount should be made for over optimistic or too conservative estimates of the salesmen depending upon their temperament.

3) Plant capacity: it should be the endeavor of the business to ensure proper utilization of plant facility and that the sales budget provides an economic and balance production in the factory.

4) General trade prospects: the general trade prospects considerably affect the sales. Valuable information can be gathered in this connection from trade papers and magazines.

5) Orders in hand: in case of industries where production is a quite in this respect. Though efforts should be made to reduce the effects of seasonal influence on the amount of sales.

6) Seasonal fluctuations: past experience will be the best guide in this respect. However efforts should be made to minimize the effects of seasonal fluctuation by providing special concession or off season discounts therefore increasing the volume of sales.

7) Potential market: market research should be carried out for ascertaining the potential market for the company products. Such an estimate is made on the basis of expected population growth purchase power of consumers and buying habits of the people.

8) Availability of material and supply: adequate supply of raw materials and other supplies must be ensured before drafting the sales programmer.

9) Financial aspect: Expansions of sales usually require increase in capital outlay also therefore sales budget must be kept within the bounds of financial capacity.

10) Other factors:

The nature and degree of competition within the industry

Cost of distributing goods

Government controls rules and regulation related to the industry

Political situation national and international

 

Posted Date: 7/8/2013 5:23:31 AM | Location : United States







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