Sales Budget: Definition & Examples

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  • 0:00 What Is a Sales Budget?
  • 1:12 How to Create a Sales Budget
  • 2:35 Sales Budget Example
  • 3:42 Lesson Summary
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Lesson Transcript
Instructor: Kevin Newton

Kevin has edited encyclopedias, taught middle and high school history, and has a master's degree in Islamic law.

The sales budget is often the first document that a company produces for accounting purposes, and is also one of the most important ones to be made. Learn all about it in this lesson on sales budgets.

What Is a Sales Budget?

One of the most important documents that your business will ever create is a sales budget. The reason for this is simple - businesses exist to make money, and a sales budget shows where that money is coming from! More specifically, the sales budget is a plan for not only how much money should be made for a given period, but where that money is going to come from. As such, a sales budget does a great job of assigning responsibilities and managing expectations. In this lesson, we're going to learn why the sales budget is typically the first budget to be created in a business, look at how to create one, and examine some of the problems that can result with a bad sales budget.

As previously mentioned, it is useful to know how much money your business is going to make during a given time period, and that's why the sales budget is one of the first documents that is created for a given point of time. Additionally, it provides information about what expectations your customers will have based off of past performance. A sales budget will let you know just how much of certain goods your customers will demand during a given time period.

How to Create a Sales Budget

So how do you create a sales budget? First, figure out the time period you want to look at. Because it is so important, most companies will come up with a sales budget every quarter, if not every month. Now compare this period to the same period in years past. If you are just starting out, make informed guesses as to how well your company will perform. A central part of this is talking to your salespeople. Not only should you make an assumption of sales based off their numbers, but also you should work with them to set expectations. After all, your salespeople know the customers in question and have a handle on how much they will actually purchase.

From there, compile your numbers by taking the number of gross sales multiplied by the price of each unit. That gives you the total gross sales. Then subtract the value of any discounts or allowances to get the total net sales. As a note, you should be prepared to do this for each category of goods.

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