The sales budget is the most difficult, yet most important budget to create when management is running a business. It is the basis for preparing the income statement and is based on its business environment, overall economic condition, the intensity of competition in the market, production capacity, and available funds the company must operate with (Borad, 2021). The sales budget is a tool that is used to evaluate the company's performance as well as being used to study the history of existing stores operating in similar locations and used as a sales projection for the remainder of the year and the base on which other budgets are prepared in an organization.

The first step to creating a sales budget is to determine the period in which the budget will be prepared as there are different advantages and disadvantages or using monthly, quarterly, or annually. The next step is to collect sales data from the company for the corresponding period of previous years, study the current market trends (economic scenario, seasonal fluctuations in demand, evolving competition, and new products or changes in customer preferences), and production capacity to ensure sufficient capacity for the forecasted numbers and to create the most realistic and achievable budget possible. Once all the information is gathered, the company department heads will present their sales figures and revenue generations expected which will go into the central sales budget. Lastly, this budget will be revisited frequently to ensure that the numbers are accurate as well as every time there is a new product or sales trend.

Works Cited

Borad, S. B. (2021). Sales Budget. Retrieved from efinanacemanagement.com: https://efinancemanagement.com/budgeting/sales-budget

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