Sales Forecasting and Budgeting

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Businesses are forced to look well ahead in order to plan their investments, launch new products, decide when to close or withdraw products and so on. The sales forecasting process is a critical one for most businesses. Key decisions that are derived from a sales forecast include: - Employment levels required- Promotional mix- Investment in production capacity

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Content

Sales Forecasting and Budgeting
Someone

Topics Covered
Planning Qualitative Techniques Quantitative Techniques: Time Series and

Casual Use of Computer Software in Sales-Forecast Budgeting: Purposes Alternative Types of Budgeting Budget Determination The Sales Budget Budget Allocation Conclusion

Forecasting: Base-line of Planning
Businesses are forced to look well ahead in

order to plan their investments, launch new products, decide when to close or withdraw products and so on. The sales forecasting process is a critical one for most businesses. Key decisions that are derived from a sales forecast include:




- Employment levels required - Promotional mix - Investment in production capacity



Types of Forecasts
 There are two major types of forecasting, which

can be broadly described as macro and micro:  Macro forecasting is concerned with forecasting markets in total. This is about determining the existing level of Market Demand and considering what will happen to market demand in the future.  Micro forecasting is concerned with detailed unit sales forecasts. This is about determining a product’s market share in a particular industry and considering what will happen to that market share in the future.

 Short-term Forecasts  Medium Term Forecasts  Long term Forecasts



FORECASTING
Appropriate production scheduling Reducing cost of purchasing R/M Determining appropriate price policy Setting sales targets and establishing

controls and incentives Evolving a suitable promotional program Forecasting short-term financial requirements
 

FORECASTING
Planning of a new unit or expansion of an

existing unit Planning of long-term financial requirements Planning of man-power requirements
 

Sales Forecasting
A sales forecast is a prediction of sales under a given set of conditions.

Sales forecasts are usually prepared under the direction of the top sales executive.

The sales budget is the result of decisions to create Conditions that will generate a desired level of sales.

Factors to Consider When Forecasting Sales
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Forecasting: Qualitative Techniques
Consumer/User Survey Method Panels of Executive Opinion Sales force Composite Delphi Method Bayesian Decision Theory Product Testing and Test Marketing 

Quantitative Techniques: Time Series
Moving Averages Exponential Smoothing Time Series Analysis Z-Charts 

Quantitative Techniques: Casual
Leading Indicators Simulation Diffusion Models

Use of Computer Software in SalesForecast
 EXECUSTAT  FOCA  MINITAB  RATS  SAS/ETS  SORITEC  SPSS  STATGRAPHICS  STATPAC GOLD  MS-EXCEL

Alternative Types of Budgeting
Zero based Budgeting Strategic Budgeting Rolling Budgets Activity based Budgeting

Sales Budget Components
 Selling Expense Budget


 Advertising Budget:

1. Percentage of last year Sales 2. Parity with Competitors 3. Affordable Method 4. Objective and Task Method 5. ROI Method 6. Incremental Method


 Administrative Budget

The Sales Budget

Sales Forecast Sales Budget Administrative Budgets

Sales Department Budget Production Budget

Cash Budget Expenditures

Profit Budget Expenditure Revenues

Revenue

Salesforce Evaluation

Flow of Presentation
Introduction Sales force evaluation process Role of evaluation in sales management Setting performance standards  

Introduction

Process

Why evaluation?

Setting Standards of Performance
The control process is based on comparison

of actual results with standards Standards provide a fair method of assessing and comparing performance The standards depends on
Region People Product 



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