A sales budget is a plan of a business' sales outlook based on the number of units it expects to produce within a specified budget period, according to AccountingTools. The sales projections are represented in units and dollars. Depending on an individual company, the sales budget may be prepared after a one- or three-month period.
The University of North Florida states that the sales budget is the cornerstone of a company’s entire budgeting processes; without it, further planning would almost be impossible. For instance, a business prepares the operating budget based on figures provided in the sales budget, which takes anticipated revenue generation from sales into account.
Accounting4Management.com highlights the significance of a sales budget in preparation of the production budget. A business works out its sales targets through the sales budget, and then it determines how many units it needs to produce to hit those targets. Through this process, the business acquires a solid basis for knowing how much it needs to spend to produce the estimated number of units.
The executives responsible for preparation of a sales budget rely on statistical, mathematical and economic methods to work out accurate sales estimates, according to the University of North Florida.