Any growing business worries about planning their sales budget correctly and getting a return on their investments. And while there is no clear-cut way to ensure errors never happen, analyzing your business projections and preparing a sales budget forecast is the right step.
The sales budget or a sales forecast is one of the essential aspects of any operating budget. The more accurate your numbers are in your sales forecast, the better you’ll be able to manage your business.
A revenue projection is often used to create a company’s estimated income statement. Simple revenue projections that rely solely on expected unit sales are available, as are more detailed forecasts that separate from the income statement and account for factors such as direct costs of products sold and indirect costs of marketing campaigns.
A spreadsheet template or model designed to suit the sales forecast needs is the best starting point for any good sales forecast or budget. Choosing the right sales budgeting software that you’re comfortable with also makes a big difference.
Here are some best practices to keep in mind in sales budgeting and forecasting.
Keep It Simple
Your sales budget documents your company’s sales goals for the upcoming accounting or budget period, as well as estimated gross revenue. Smaller businesses with fewer product categories and territories can create a sales budget for the entire company. For the sake of convenience and getting the job done on time, larger organizations with a variety of products typically aggregate the budget into product groups and regional sections.
Keeping your sales budget updated can help drive your strategy. It’s always ideal to prepare your sales budget weekly or monthly, rather than quarterly and annually.
Improve Communication & Collaboration Between Departments
The sales budget is not just a financial concern. It is relevant to the entire organization. So while the sales team deals with consumers regularly and provides the bulk of feedback, everyone across the organization needs to know.
Keep in mind that marketing refers to promotional content, which can influence sales volume and timing. Brand managers may be aware of new product production and release dates, as well as product discontinuation. Based on their observations, the executive team can review and revise figures.
In sales budgeting and forecasting, the following aspects can help improve communication and collaboration between departments and teams.
- Knowing the objective
- Identifying clear and measurable goals
- Knowing the target market
- Identifying the techniques and methods that perform better than others
Provide Quotas and Incentives for Your Sales Team
You’ll need an objective concept of “success” to evaluate results. Set sales quotas for the sales reps and representatives. This will act as financial benchmarks against which the revenue forecasting will be measured.
The sales plan isn’t set in stone or concrete, but it is consistent. It thrives on new information and loves being kept up to date as circumstances and inputs change and advance.
Overall, a sales plan can be a handy, systematic, and strategic spreadsheet for focusing a company’s efforts.
Create a Budget Schedule for Your Team and Establish a Sales Process
You won’t foresee the probability of an opportunity closing if the sales team isn’t regularly following the same phases and measures. Learn how to develop a recorded, organized sales process to use when transforming every prospect from a lead to a customer in your sales process.
Choose The Right Sales Budgeting & Forecasting Approach
You can choose a sales forecasting method once you’ve established your sales process, sales quota, and once you´ve chosen your FP&A tool. The system you use will be determined by several factors, including the age of your company, the size of your sales staff and pipelines, the nature of your sales data, and your data tracking habits.
If your company is new or doesn’t have much historical sales data, intuitive forecasting is the best strategy. If you’re new to sales forecasting and have a busy sales pipeline, opportunity stage forecasting and duration of sales cycle forecasting are good places to start. However, all of these approaches offer objective forecasting estimates, so if you’re looking for that, these are the methods to use.
Sales Budgeting and Forecasting With Performance Canvas Financial (PCF)
Sales forecasts help you to identify issues early enough to avert them. For example, if you find your team is falling 35 percent short of the quota, you can figure out why and fix the situation.
Finding these issues now, rather than at the end of the month or quarter, has a significant effect.
The right sales and budgeting approach can help you plan for the future.
Keep in mind that sales forecasts don’t have to be flawless to be useful. Your sales forecast will often have a variance from your actual performance.
But if you’re using a tool like PCF that ensures you have accurate data and actionable insights, your sales forecasts will continue to prepare you for the road ahead.
Performance Canvas, beyond just offering sales forecasting, improves the overall financial reporting, budgeting, and forecasting process. Companies that use PCF have more leverage over the internal factors that impact a sales budget and are more agile in adapting to external factors. It helps you to incorporate modules such as accounts receivable and payable, advanced consolidation, and several others in addition to a sales module. Teams can add more functionality at their speed and take a step-by-step approach to implementation.
Contact PCF today to learn more about how we can help you boost your sales budgeting process.