Differentiate between Sales Forecast and Sales Budget

Differentiate between Sales Forecast and Sales Budget

Sales Budget expresses your intentions/desires. It is the number you actually hope to get from sales. This is where you ‘want’ to go – your ultimate sales goal. That sales forecast will help you figure out what areas are exceeding or not meeting expectations so you can take action sooner rather than waiting for the end of the year to see if you meet your numbers.

A sales forecast and a sales budget are differentiated in the following ways:

The sales forecast provides the framework for the detailed planning presented in the master budget of an organization. Based on planned strategies and its best business judgment, management converts a sales forecast into a sales plan through the commitment of resources and the establishment of control mechanisms. The sales budget provides an evaluative tool by presenting monthly indexes of the volume of units and returns as hard targets for the sales team.

The sales budget projects that portion of potential sales the sales team believes it can achieve. The forecast, then, sets the parameters on the top side while the production capacity and sales acumen of the team sets the floor.

The sales budget, therefore, is predicated on a company’s ability to meet expected demand at or near its maximum profit potential. Sales forecasting, on the other hand, is the prediction of the future sales of a particular product over a specific period of time-based on pact performance of the product, inflation rates, unemployment, and consumer spending patterns, market trends, and interest rates.