Budgeting
Introduction:
Budgeting is a process of preparing detailed statement of forecasted financial results within period of time in the future (Peavler, n.d.), which means preparing comprehensive financially plan for the future in terms of operations and actions. There are many kinds of budgets in business but the sales budget is the one that matters for managers when doing their business and it is “A sales budget is a detailed schedule showing the expected sales for the budget period; typically, it is expressed in both dollars and units of production. An accurate sales budget is the key to the entire budgeting in some way” (Accounting4management.com, 2014)
GENERATION OF OTHER BUDGETS FROM SALES BUDGET:
Regarding the statement “: It is most sensible to start with the sales budget and develop the other budget from there.” I do agree with this statement as the key player that identify the activity and progress of certain business is the sales .As sales is very important for any business as it determine the organization activity that is why other budgets could be generated from the sales budget.
Managers depend on the sales revenues to measure the profit, as it is defines as the amount of money delivered to the organization for its products or services offered by the organization. “Income from sales of goods and services, minus the cost associated with things like returned or undeliverable merchandise. Also called "Sales", "Net Sales", "Net Revenue", and just plain "Revenue" “(Moneychimp.com, 2014).
Success in sales always aim to sell more to get much more profit. This is the goal for every company and organization. There are two strategies that will help company to reach to its goal; there are two options to get to that goal which are:
1) Increasing sales.
2) Widening the margin.
For the strategies we mentioned above, I will describe them in the coming paragraphs;
1st Strategy: Increase the normal sales by put higher forecast and work on it for example if you are sales person and you are subjected to sell 100 box of your products, make it 130 Box forecasted and work on achieving that goal.(Connick, 2014)
2nd Strategy: This strategy will focus not only on the total sales, but concentrate on the high quality products that are much profitable than other products, which means instead of increasing the total sales from 100 to 130, break it down to 70 regular products and 30 high quality profitable products. (Connick, 2014)
Conclusion:
Budgeting is the planning for financial assets and managing it in company’s business. Budgeting is very important as it covers every single detail regarding sales, cost as and financial details; that is why it is very important for managers to evaluate the financial situation and performance (AbiNader, 2014). That information will help managers to determine which tools they can use and how to use their resources in the most profitable way. Managers will be easily aware of the financial situation and make it easy for them to modify their plans within specific time.
Refrences:
AbiNader, R. (2014). Budgeting - benefits, expenses. [online] Referenceforbusiness.com. Available at: http://www.referenceforbusiness.com/encyclopedia/Bre-Cap/Budgeting.html [Accessed 8 Jun. 2014].
Accounting4management.com, (2014). Sales budget , sales budget formula , sales budget examples | Management Accounting. [online] Available at: http://www.accounting4management.com/sales_budget.htm [Accessed 7 Jun. 2014]
Moneychimp.com, (2014). Sales Revenue - Definition. [online] Available at: http://www.moneychimp.com/glossary/sales_revenue.htm [Accessed 8 Jun. 2014].
Peavler, R. (n.d.). Budgeting Definition for Business Finances. [online] About.com Business Finance. Available at: http://bizfinance.about.com/od/glossary1/g/budgeting.htm [Accessed 7 Jun. 2014].