PROFIT PLANNING Profit planning is simply the development of your operating plan for the coming period.

Your plan is summarized in the form of an income statement that serves as your sales and profit objective and your budget for cost. How Is It Used? The profit plan is used in the following ways: Evaluating operations. Each time you prepare an income statement, actual sales and costs are compared with those you projected in your original profit plan. This permits detection of areas of unsatisfactory performance so that corrective action can be taken. Determining the need for additional resources such as facilities or personnel. For example, the profit plan may show that a sharp increase in expected sales will overload the company's billing personnel. A decision can then be made to add additional invoicing personnel, to retain an EDP service, or to pursue some other alternative. Planning purchasing requirements. The volume of expected sales may be more than the business' usual suppliers can handle or expected sales may be sufficient to permit taking advantage of quantity discounts. In either case, advance knowledge of purchasing requirements will permit taking advantage of cost savings and ensure that purchased goods are readily available when needed. Anticipating any additional financing needs. With planning, the search for needed funds can begin as early as possible. In this way, financial crises are avoided and financing can be arranged on more favourable terms. Advantages of Profit Planning Profit planning offers many advantages to your business. The modest investment in time required to develop and implement the plan will pay liberal dividends later. Among the benefits that your business can enjoy from profit planning are the following: Performance evaluation. The profit plan provides a continuing standard against which sales performance and cost control can quickly be evaluated. Awareness of responsibilities. With the profit plan, personnel are readily aware of their responsibilities for meeting sales objectives, controlling costs, and the like. Cost consciousness. Since cost excesses can quickly be identified and planned, expenditures can be compared with budgets even before they are incurred, cost consciousness is increased, reducing unnecessary costs and overspending. Disciplined approach to problem-solving. The profit plan permits early detection of potential problems so that their nature and extent are known. With this information, alternate corrective actions can be more easily and accurately evaluated. Thinking about the future. Too often, small businesses neglect to plan ahead: thinking

about where they are today, where they will be next year, or the year after. As a result, opportunities are overlooked and crises occur that could have been avoided. Development of the profit plan requires thinking about the future so that many problems can be avoided before they arise. Financial planning. The profit plan serves as a basis for financial planning. With the information developed from the profit plan, you can anticipate the need for increased investment in receivables, inventory, or facilities as well as any need for additional capital. Confidence of lenders and investors. A realistic profit plan, supported by a description of specific steps proposed to achieve sales and profit objectives, will inspire the confidence of potential lenders and investors. This confidence will not only influence their judgment of you as a business manager, but also the prospects of your business' success and its worthiness for a loan or an investment. Limitations of Profit Planning Profit plans are based upon estimates. Inevitably, many conditions you expected when the plan was prepared will change. Crystal balls are often cloudy. The further down the road one attempts to forecast, the cloudier they become. In a year, any number of factors can change, many of them beyond the control of the company. Customers' economic fortunes may decline, suppliers' prices may increase, or suppliers' inability to deliver may disrupt your plan. The profit plan requires the support of all responsible parties. Sales quotas must be agreed upon with those responsible for meeting them. Expense budgets must be agreed upon with the people who must live with them. Without mutual agreement on objectives and budgets, they will quickly be ignored and serve no useful purpose. Finally, profit plans must be changed from time to time to meet changing conditions. There is no point in trying to operate a business according to a plan that is no longer realistic because conditions have changed.

SALES BUDGET A sales budget is the amount of money available or assigned for a definite period. Its based on estimates of expenditure during that period and on proposals for financing the budget. Thus the budget depends on the sales forecast and the amount of revenue expected to be generated for the organization during that period. The budget for the sales force is a valuable resource that the sales manager re-distributes among lower level managers. Budget funds must be appropriated wisely in order to properly support selling activities that allow sales personnel and total marketing group to reach their performance goals. Budget Purposes The budget is an important factor in the successful operation of the sales force. Top sales managers spend a great deal of time attempting to convince corporate management to increase the size of their budget. Budgets are formulated for many reasons, including the major ones of planning, co-ordination & control. Planning:Corporations and their functional units develop objectives for future periods and budgets determine how these objectives will be met. For example alternative marketing plans, the probable profit from each plan and individual budget for each will be considered before management is able to decide on future management programes. Co-ordination: The budget is the major management tool for co-ordinating the activities of all functional areas and sub-groups within the entire organization. For example sales must be co-ordinated with production to ensure that enough products are available to meet demand. The production manager can use sales forecast and the sales departments marketing plans to determine the necessary production level. Budgeting allows the financial executive to determine the firms revenues & expensesand have enough capital to finance all business operations. However some flexibility must be built into the budget so that plans may be changed in response to market conditions. Many companies allocate a dollar lump sumto their managers, allowing their managers to invest in selling activities dictated by the sales and marketing plans. Thus each sales group has a budget. Control Allocation of budgeted funds gives management control over their use. Sales managers estimate their budget needs, are given funds to operate their units and then are held responsible for reaching their stated goals by using their budgets effectively. As the sales program is implemented and income and expenses are actually generated, managers assess results against the amount budgeted and determine whether they are meeting objectives. Sales Budgeting Methods: How much money does the sales manager receive to operate the sales force ? although no fixed financial formulas exist to appropriate funds, firms use one of the three general methods to determine how money should be allocated. First, some firms use an arbitrarypercentage of sales. Second, other firms may use executive judgement.

Third , a few companies estimate the cost of operating each sales force unit along with the cost of each sales program over a specific period to arrive at a total budget. Whichever method is chosen the actual amount budgeted will be based on the organizations sales forecast, marketing plans, projected profits, top managements perception of the sales forces importance in reaching corporate objectives, and the sales managers skill in negotiating with superiors. Budgets are often modified several times before the final dollar figures are estimated. To get started, answer the following questions: How much can you realistically sell next year? How much will you charge for your goods or services? How much will it cost to produce your product? How much are your operating expenses? Do you need to hire employees? If so, how many, and how much will you pay them? How much will you pay yourself? How much payroll tax and unemployment tax will you pay? How much money do you need to borrow, and how much will your monthly loan payments be? The answers to these questions will form the basis of your budget and forecast. If you've already written a business plan, you should know the answers to many of these questions. If not, then this is a lot of information to try to forecast. In either case, answering these questions will help you determine two essential things your projected income and your expenses. In the income category, conservatively estimate how much sales revenue you'll have next year. Look at what you made last year, and extrapolate and forecast from that. New business owners without this kind of history should try to determine how much their competitors gross, and use that as a guide. Remember to be realistic. If you paint too rosy a picture, you can easily get in over your head and spend money that never materializes. If you make more than your projected income, great. But if you make less, watch out!

As far as expenses go, consider advertising, auto, insurance, rent, taxes, phone, utilities, equipment, payroll in other words, any and all business expenses, whether you pay them now or incur them in the future. Once you see your projected income and expenses on paper, you'll know exactly how much you need to make every month to keep things afloat, and how much you'll have left over for extra expenses. It will be far less tempting to spend money on business expenses that aren't part of your plan. And that's really what a budget is for to ensure that your expenses aren't more than your income, so you can keep your company afloat. It's as simple as that. The sales budget is the starting point in preparing the master budget, since estimated sales volume influences nearly all other items appearing throughout the master budget. The sales budget should show total sales in quantity and value . The expected total sales can be break-even or target income sales or projected sales. It may be analyzed further by product, by territory, by customer, and, of course, by seasonal pattern of expected sales. A Sales Budget usually comes along with Schedule of Expected Cash Collectionfrom credit sales, which will be used fpr cash budgeting (later on), and here is the cashcollection schedule:

Monthly Cash Collections from Customers Frequently there are time lags between monthly sales made on account and their related monthly cash collections. For example, in any month, credit sales are collected in this manner: 15 percent in month of sale, 60 percent in the following month, 24 percent in the month after, and the remaining 1 percent are uncollectible. The budgeted cash receipts for June and July are computed then (see below):

SALES ANALYSIS
A sales analysis report includes sales-related metrics, also called key performance indicators, for a specified time-period. Sales analysis reports provide a record of past performance and can be used as a tool to predict future business performance.

1. Purpose of Sales Analysis Reports

o

Sales analysis reports are used to measure and monitor sales department performance. Sales managers use these reports to develop sales strategies, better understand past results and to help forecast future results. Sales representatives use these reports to closely track their performance against sales goals and to plan and prioritize sales activities. Finance and human resources staff members use these reports to calculate sales compensation and bonus payouts for sales department employees.

Sales Analysis Metrics

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The sales related metrics most common in sales analysis reports include top line sales revenue, net sales revenue, sales goals or quotas, performance as a percentage of sales goals, sales profit, sales pipeline and the type of products sold (also called product mix). This information is often available at an individual sales representative level, a team level and at the department level.

Report Creation
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Sales analysis reports can be created manually by extracting data from a database, then converting the data into a report template using Microsoft Office tools. They may also be calculated automatically and be available for online viewing within a customer relationship management (CRM) or an enterprise resources planning (ERP) system.

Frequency Of Reporting
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Most sales organizations provide sales analysis reporting that is updated daily, weekly, monthly, quarterly and annually. With the use of automation tools, companies can also leverage "real time" sales analysis reporting.

Sales Data

Database

It is mission critical that the data used to create and calculate sales analysis reports is extracted from a trusted source or database. If poor quality data are used, then the sales reports will be inaccurate. This will cause many immediate and downstream business problems.

Budgeting Advantages

Define goals and objectives Align corporate goals with regards to markets, sales levels, margins, manning, cost levels and capital investment with your budgets. Think about and plan for the future. Compels management to think about the future. Management should look ahead and set out plans for each business unit, anticipating change and giving the organisation clear direction. It encourages management to be forward-looking and working within the framework of a budget encourages good decision-making. Means of Allocating Resources During the budgeting process many resource allocation decisions are made. Different segments may require resources for capital expenditure that the organisation cant fully meet. The organisation will make decisions based on the various rates of return. Uncover Potential Bottlenecks Have I the resources to meet my revenue projections in terms of manpower, material resources and capital equipment? Coordinate Activities The budgeting process brings together the plans and financial budgets of each business unit. It encourages communication up the organisation from subordinates to superiors. It also encourages communication across business units, for example, between marketing and production about sales plans.

Performance Criteria Provide a basis for variance analysis and enable remedial action to be taken as variances occur. The budget is a yardstick against which actual performance is assessed.

3 Most Common Budgeting Problems

Many people experience budgeting problems when they try to keep track of the money that they spend. Here are a few of the most common budgeting problems: 1. Variable Expenses One of the most common budgeting problems that everyone faces is dealing with variable expenses. Bills that fluctuate from month to month are very difficult to estimate when budgeting. Sometimes, this requires that you estimate the expense until you know how much it will be. 2. Tracking Expenses Another common problem is keeping track of the expenses that you have. While you might establish a good budget, it will not matter unless you can keep track of what you have already spent. Enforcing the budget is just as important as coming up with a budget. 3. Category Budgeting When budgeting, one of the most common tactics is to break every expense down into a particular category. This allows you to determine how much you spend on groceries, entertainment and restaurant meals, for example. However, one of the most own problems is deciding exactly how much money to allocate to each category. Deciding which categories the most important can be challenging for anyone that is trying to come up with a budget. Before you establish a budget, track your expenses for three months to know where you money goes, only then can you determine what type of budget you will need.

FLEXIBLE BUDGETING Introduction:

A budget is a plan for the future. Hence, budgets are planning tools, and they are usually prepared prior to the start of the period being budgeted. However, the comparison of the budget to actual results provides valuable information about performance. Therefore, budgets are both planning tools and performance evaluation tools.

Usually, the single most important input in the budget is some measure of anticipated output. For a factory, this measure of output is the number of units of each product produced. For a retailer, it might be the number of units of each product sold. For a hospital, it is the number of patient days (the number of patient admissions multiplied by the average length of stay). The static budget is the budget that is based on this projected level of output, prior to the start of the period. In other words, the static budget is the original budget. The static budget variance is the difference between any line-item in this original budget and the corresponding line-item from the statement of actual results. Often, the line-item of most interest is the bottom line: total cost of production for the factory and other cost centers; net income for profit centers. The flexible budget is a performance evaluation tool. It cannot be prepared before the end of the period. A flexible budget adjusts the static budget for the actual level of output. The flexible budget asks the question: If I had known at the beginning of the period what my output volume (units produced or units sold) would be, what would my budget have looked like? The motivation for the flexible budget is to compare apples to apples. If the factory actually produced 10,000 units, then management should compare actual factory costs for 10,000 units to what the factory should have spent to make 10,000 units, not to what the factory should have spent to make 9,000 units or 11,000 units or any other production level. The flexible budget variance is the difference between any line-item in the flexible budget and the corresponding line-item from the statement of actual results. The following steps are used to prepare a flexible budget: 1. Determine the budgeted variable cost per unit of output. Also determine the budgeted sales price per unit of output, if the entity to which the budget applies generates revenue (e.g., the retailer or the hospital). Determine the budgeted level of fixed costs. Determine the actual volume of output achieved (e.g., units produced for a factory, units sold for a retailer, patient days for a hospital). Build the flexible budget based on the budgeted cost information from steps 1 and 2, and the actual volume of output from step 3.

2. 3.

4.

Flexible budgets are prepared at the end of the period, when actual output is known. However, the same steps described above for creating the flexible budget can be used prior to the start of the period to anticipate costs and revenues for any projected level of output, where the projected level of output is incorporated at step 3. If these steps are applied to various anticipated levels of output, the analysis is called pro forma analysis. Pro forma analysis is useful for planning purposes. For example, if next years sales are double this years sales, what will be the companys cash, materials, and labor requirements in order to meet production needs?

Comparison between Bill Discounting and Factoring. Bill Discounting 1. Individual Transaction 2. Each bill has to be individually accepted by the drawee which takes time. 3. Stamp duty is charged on certain usance bills together with bank charges. It proves very expensive. Factoring 1. Whole turnover basis. This also gives the client the liberty to draw desired finance only. 2. A one time notification is taken from the customer at the commencement of the facility. 3. No stamp duty is charged on the invoices. No charges other than the usual finance and service charge. 4. More paperwork is involved. 5. Grace period for payment is usually 3 days. 6. Original documents like MTR, RR, and Bill of Lading are to be submitted. 7. Charges are normally up front. 7. No upfront charges. Finance charges are levied on only the amount of money withdrawn. Comparison between Cash Credit and Factoring. Cash Credit Factoring 4. No such paperwork is involved. 5. Grace periods are far more generous. 6. Only copies of such documents are necessary.

1. Margin retained on receivables are usually 40-50 1. Margin usually retained is 10 %. %. 2. The drawing power on the basis of stock statements is computed once a month. If invoices are raised between submissions of stock 3. No statements are to be given. On the contrary Factors furnish various reports to both the client and the customer. 2. Prepayments against invoices are made as and when they are factored. It is like cash sales.

statements, no money can be drawn against them. 3. The client has to submit various statements like QIS, I, II & III stock statements etc. to the bank.

4. One of the functions of the factor is debt 4. No collection services performed for the clients. 5. Once a book debt exceeds its usance period, it is removed from the eligible list 6. Higher limits are bifurcated into CC and DL components. 7. Interest linked to PLR. 6. No such bifurcation. The factoring account operates like a CC account 7. Finance charge linked to our cost of funds, which is competitive to that of banks. collection 5. The Factor allows grace up to 30 days.

PRICING STRATEGIES
Premium Pricing. Use a high price where there is a uniqueness about the product or service. This approach is used where a a substantial competitive advantage exists. Such high prices are charge for luxuries such as Cunard Cruises, Savoy Hotel rooms, and Concorde flights.

Penetration Pricing. The price charged for products and services is set artificially low in order to gain market share. Once this is achieved, the price is increased. This approach was used by France Telecom and Sky TV.

Economy Pricing. This is a no frills low price. The cost of marketing and manufacture are kept at a minimum. Supermarkets often have economy brands for soups, spaghetti, etc.

Price Skimming. Charge a high price because you have a substantial competitive advantage. However, the advantage is not sustainable. The high price tends to attract new competitors into the market, and the price inevitably falls due to increased supply. Manufacturers of digital watches used a skimming approach in the 1970s. Once other manufacturers were tempted into the market and the watches were produced at a lower unit cost, other marketing strategies and pricing approaches are implemented.

Price Video

To watch the full Pricing Models video please register FREE here Premium pricing, penetration pricing, economy pricing, and price skimming are the four main pricing policies/strategies. They form the bases for the exercise. However there are other important approaches to pricing.

Psychological Pricing. This approach is used when the marketer wants the consumer to respond on an emotional, rather than rational basis. For example 'price point perspective' 99 cents not one dollar.

Product Line Pricing. Where there is a range of product or services the pricing reflect the benefits of parts of the range. For example car washes. Basic wash could be $2, wash and wax $4, and the whole package $6.

Optional Product Pricing. Companies will attempt to increase the amount customer spend once they start to buy. Optional 'extras' increase the overall price of the product or service. For example airlines will charge for optional extras such as guaranteeing a window seat or reserving a row of seats next to each other.

Captive Product Pricing Where products have complements, companies will charge a premium price where the consumer is captured. For example a razor manufacturer will charge a low price and recoup its margin (and more) from the sale of the only design of blades which fit the razor.

Product Bundle Pricing. Here sellers combine several products in the same package. This also serves to move old stock. Videos and CDs are often sold using the bundle approach.

Promotional Pricing. Pricing to promote a product is a very common application. There are many examples of promotional pricing including approaches such as BOGOF (Buy One Get One Free).

Geographical Pricing. Geographical pricing is evident where there are variations in price in different parts of the world. For example rarity value, or where shipping costs increase price.

Value Pricing. This approach is used where external factors such as recession or increased competition force companies to provide 'value' products and services to retain sales e.g. value meals at McDonalds.

MARKET SEGEMENTATION
Market segmentation is a concept in economics and marketing. A market segment is a sub-set of a market made up of people or organizations with one or more characteristics that cause them to demand similar product and/or services based on qualities of those products such as price or function. A true market segment meets all of the following criteria: it is distinct from other segments (different segments have different needs), it is homogeneous within the segment (exhibits common needs); it responds similarly to a market stimulus, and it can be reached by a market intervention. The term is also used when consumers with identical product and/or service needs are divided up into groups so they can be charged different amounts for the services. The people in a given segment are supposed to be similar in terms of criteria by which they are segmented and different from other segments in terms of these criteria. These can be broadly viewed as 'positive' and 'negative' applications of the same idea, splitting up the market into smaller groups. Examples:

Gender Price Interests Location Religion Income Size of Household

While there may be theoretically 'ideal' market segments, in reality every organization engaged in a market will develop different ways of imagining market segments, and create Product differentiation strategies to exploit these segments. The market segmentation and corresponding product differentiation strategy can give a firm a temporary commercial advantage.
Contents
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1 Bases for segmenting consumer markets 2 Geographic segmentation 3 Psychographic Segmentation 4 "Positive" market segmentation 5 Behavioral Segmentation

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5.1 Occasions 5.2 Benefits 5.3 Users status

6 Using Segmentation in Customer Retention

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6.1 Process for tagging customers 6.2 Niche Marketing 6.3 Local Marketing

7 Price Discrimination 8 References

[edit]Bases

for segmenting consumer markets

Geographic segmentation Demographic segmentation Psychographic segmentation

Behavioral segmentation

[edit]Geographic

segmentation

The market is segmented according to geographic criteria- nations, states, regions, counties, cities, neigborhoods, or zip codes. Geo-cluster approach combines demographic data with geographic data to create a more accurate profile of specific [edit]Psychographic
[1]

Segmentation

psychographics is the science of using psychology and demographics to better understand consumers.Psychographic segmentation: consumer are divided according to their lifestyle, personality, values. People within the same demographic group can exhibit very different psychographic profiles.3 4ps [edit]"Positive"

market segmentation

Market segmenting is dividing the market into groups of individual markets with similar wants or needs that a company divides into distinct groups which have distinct needs, wants, behavior or which might want different products & services. Broadly, markets can be divided according to a number of general criteria, such as by industry or public versus private. Although industrial market segmentation is quite different from consumer market segmentation, both have similar objectives. All of these methods of segmentation are merely proxies for true segments, which don't always fit into convenient demographic boundaries. Consumer-based market segmentation can be performed on a product specific basis, to provide a close match between specific products and individuals. However, a number of generic market segment systems also exist, e.g. the system provides a broad segmentation of the population of the United States based on the statistical analysis of household and geodemographic data. The process of segmentation is distinct from positioning (designing an appropriate marketing mix for each segment). The overall intent is to identify groups of similar customers and potential customers; to prioritize the groups to address; to understand their behavior; and to respond with appropriate marketing strategies that satisfy the different preferences of each chosen segment. Revenues are thus improved. Improved segmentation can lead to significantly improved marketing effectiveness. Distinct segments can have different industry structures and thus have higher or lower attractiveness Once a market segment has been identified (via segmentation), and targeted (in which the viability of servicing the market intended), the segment is then subject to positioning. Positioning involves ascertaining how a product or a company is perceived in the minds of consumers.

This part of the segmentation process consists of drawing up a perceptual map, which highlights rival goods within one's industry according to perceived quality and price. After the perceptual map has been devised, a firm would consider the marketing communications mix best suited to the product in question. [edit]Behavioral

Segmentation

In behavioral segmentation, consumers are divided into groups according to their knowledge of, attitude towards, use of or response to a product. [edit]Occasions segmentation according to occasions.we segment the market according to the occasions. [edit]Benefits segmentations according to benefits sought by the consumer. [edit]Users

status

nonusers, ex-users, first time users, etc.

Marketing Cost Analysis

by V S RAMA RAO on DECEMBER 10, 2007

Marketing cost analysis is another important tool of marketing control. In recent years, business firms all over the world have experienced steep escalations in their marketing and distribution costs. They have found, to their dismay, that increased sales do not necessarily bring them increased profits. Containing marketing and distribution costs has become an imperative for optimizing profits. It has also become an imperative for survival against the growing competition. Importance of Marketing Cost Analysis: The first requirement in controlling the marketing costs is to comprehend the components of the marketing costs and the methods available for their control. Benefits of Marketing Cost Analysis: Careful and systematic marketing cost analysis confers a variety of benefits on the firm. Types of marketing Costs:

Marketing costs in modern, large-sized firms belong to a kaleidoscopic variety. There are ever so many components of the marketing cost and they vary in their significance, size, measurability and controllability. Generally, marketing costs are more difficult to measure and control, compared with other costs, such as material costs and manufacturing costs. Within the various components of marketing costs, some are relatively more amenable for measurement and control than others Analyzing the costs by function: The first step in marketing cost analysis is to gather the cost details of the various marketing function and analyze the function wise cost. For doing this, in the first instance various marketing activities have to be grouped into a few major and clearly identified functions. The marketing expenditure must be broken up over these functions. Components of marketing costs: * Physical distribution * Inventory costs or costs of holding stocks * Channel costs or costs of remunerating and administering the marketing channels. * Selling/sales administration costs * Promotion costs * Cost of credit extended * Cost of marketing information and marketing research The costs incurred by each function must then be measured against the budgeted figures and the standard costs for that function. The cost incurred by the function should be compared with the results accomplished e.g. sales volume achieved, gross margins achieved and net realization made. Steps involved in Marketing Cost Analysis: * Assigning the marketing costs to the various functions of marketing. * Analyzing the costs function by function. * Assigning the functional expenses to the various marketing entities, Each product

Each customer group Each territory Each channel type * Analyzing the cost entity by entity * Examining the cost benefit position for each function, broken up over each entity. * Determining what corrective action is needed. Analyzing the Costs by marketing entities: After analyzing the costs function wise the firm should analyze the costs by each marketing entity each product, each territory etc. For this purpose, the firm must put in place an accounting system that facilitates the assignment of functional expenses to the various entities like products, markets and customers. Lines on Which Marketing Costs are analyzed: By Product: * By brand * By order size in each product * By stock turnover ratio of the respective product; expenditure for fast selling products and slow selling products. * By the warehousing cost incurred by each product. By customer group: * By customer type * By order size of customers purchases * By the proportion of cash and credit sales in each customer type. * By the mode/manner of delivery taken by customers By territory: * By the selling expenses incurred by each territory * By the promotion expenses incurred by each territory * By the cost of credit incurred by each territory * By the rate of turn round of stocks in each territory By marketing method and channel type:

* By the method of sale; direct to customer, or through wholesaler or retailer, or commission agent. * By order size and order handling cost to the firm. * By salesman; cost of sales calls, cost of orders booked, order to call ratio etc. * By price category and discount classification; cost incurred at each price category.
more at http://www.citeman.com/2488-marketing-cost-analysis.html#ixzz1dr6J6Sn9

Objectives of Sales Budget:1.Planning :- The company formulates marketing and sales objectives; the budget determines how these objectives will be met through a detailed breakdown of the sales budget among products, territories and customers. 2. Co-ordination:- The budget establishes what the cost of various heads be thereby maintaining a desired relationship between expenditure and revenues.The budget enables sales executives to coordinate expenses with sales.It also restricts the sales executives form spending more that their share of the funds helping to prevent expenses from getting out of control. 3. Evaluation:- Sales department budgets become tools to evaluate the departments performance. By meeting the sales & cost goals set forth in the budget, a sales manager may prove himself to be a successful executive.Sales budget can be determined on the basis of following categories: