Definition Definition

Sales budget

Definition (1):

A sales budget is a conservative estimate of the expected volume of sales, primarily for making current purchasing, production, and cash flow decisions. It’s based on the need to avoid excessive risk and is generally set slightly lower than the sales forecast.

Definition (2):

This budget is the first budget prepared. Each of the other budgets depends on this budget. It is derived from the sales forecast. It represents management’s best estimate of sales revenue for the budget period. An inaccurate sales budget may adversely affect net income. For example, an overly optimistic sales budget may result in excessive inventories that may have to be sold at reduced prices. In contrast, an unduly conservative budget may result in loss of sales revenue due to inventory shortages.

Definition (3):

The sales budget is prepared by multiplying the expected unit sales volume for each product by its anticipated unit selling price.

It is a financial plan showing how resources should be allocated for attaining the forecasted sales. The main motive of this budget is planning for the maximum utilization of resources and forecasting sales. The information needed for preparing this budget comes from various sources. One of the mentionable sources is the salespeople who deal with the products daily. The organization can also collect information from the production department relating to the date of production or expiry.

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