Sales budget is the first main component of the master budget. It includes expected quantity and the expected price and the product of the two factors are calculated to find out the expected sale value. This is vital to forecast the quantity and the unit price with sufficient reliability, otherwise the sales budget will not be reliable and as a result the master budget will also be of no use.
Preparing the sales budget for a company who is in the business from a long time is not a difficult task. However, a company which is a established newly can face difficulty in the preparation and it has to look for outside resources to make the said budget.
Importance of Sales Budget
Most of the items in the master budget depend upon the sales budget, so it is of vital importance to use data which is reliable enough. The use of probabilities is a good way to incorporate the effects of guess work in the sales quantities and prices. While at the time of making budget, it is equally important that you consider external factors which may affect the future sales. In order to understand these factors, the PEST (Political Economical Social and Technological) model may be used which unfolds the hidden external factors affecting the sales of the company.
Example
ABC Company is engaged in the production of bed sheets. It is preparing sales budget for the next year over the basis of quarterly period. The sales quantities of the next year for each quarter are as follows:
| Quarter 01 | Quarter 02 | Quarter 03 | Quarter 04 | Total | |
| Quantity | 1,000 | 1,100 | 1,000 | 1,200 | |
| Price Per Unit | 10 | 11 | 10 | 10 | |