Question

"What are the difficulties in preparing a sales budget?" Please go into much detail as you can, thank you.

Answer 1

A sales budget is refers to the direct outcome of sales forecast. It is based on the consideration of future prediction of sales, competition in the market, past sales trends, demand and supply situation, seasonal changes that affect sales and so on. Although there are several methods of sales forecasting, however main broad approaches include manual and data-driven processes. In either scenario, significant time is needed to develop forecasts. It involves too much managerial time; and is prepared first because all other budgets rely on its information. It is costly because companies sometimes pay licensing fees to software providers for data access. Then one of the most difficult parts of sales budgeting is determining which categories are the most vital and thus must receive the maximum funding. Since sales reps look better and earn high commission when they achieve high sales targets; thus there is a challenge for company marketing and sales reps in preparing forecasts is difficulty of avoiding the internal bias.