5 Major Limitations in Sales Budgeting

Limitations in Sales Budgeting

There are several issues in budgeting and allocation that need to be analyzed. Sales budgeting is mainly done at the macro level but the actions take place at the micro level. The top management allocates the budgets and may take feedback from the local sales managers which again depend upon whether the organization follows a centralized or decentralized decision-making process.

There can be many other issues that the sales budgeting process has to look at. Some of them are:

  1. Establishing Need for Budget
  2. Having Multiple Views of Sales Budget
  3. Identifying Npas and Planning Events
  4. Monitoring Forecasted Figures to Actual Sales
  5. Time Interval for Monitoring Sales Budgets
Limitations in Sales Budgeting
Limitations in Sales Budgeting

Establishing Need for Budget

The budget would be established for different regions depending on the need. Hence the sales manager should be able to establish the need for budgets. The sales managers at a branch level would best know the real activities of the sales process happening at the micro level i.e. at the branch level and the expenses in incurring the sales.

The exact need for a budget should be established by taking into account all the expenses such as travel expenses, office rent, and bills for electricity, phone lines, etc. The budgets should be allocated at the local level by taking feedback from the sales managers.

Having Multiple Views of Sales Budget

The sales budget created should clearly identify the sales from various dimensions such as:

  • Sales by the region/ territory
  • Sales by the product or service
  • Sales by the sales representative

Having multiple views will help in guiding if the expectations are not as per the sales forecast.

Identifying Npas and Planning Events

Having created the sales budgeting from many angles as stated above enables the sales manager to identify the NPAs in his region/ territory. In sales non-performing assets are termed as NPT which stands for Non-performing territories.

For example, the overall sales figure for the city is increasing but due to multiple views, the sales manager can easily see that one of the territories in his region is showing a downward trend in sales figures. Hence necessary action can be taken to improve the sales figure.

It is understood in the business world that a market leader will work to develop new territories and may leave the territories which are underperforming whereas a market follower would safeguard existing underperforming territories and strive for development.

The NPA can be the sales representative too if they are not able to attain their sales quotas. Hence, the sales manager can identify such representatives and take necessary action to improve their productivity levels.

Monitoring Forecasted Figures to Actual Sales

Most of the companies divide the yearly forecast figures into monthly sales which could be attained by the sales representatives if they achieve their assigned quotas. But there would be chances that the forecast may go wrong and the quotas set were not realistic.

In such cases, it is always important to monitor the actual sales figures with the forecasted sales figures at regular intervals. Sales managers may use the variance analysis technique like ANOVA to check the variance.

Time Interval for Monitoring Sales Budgets

The time interval to check for variance and sales budgeting depends upon the sales manager and may be done daily or weekly or monthly or quarterly or half yearly or yearly.

However one must understand that too frequent monitoring may result in a waste of time and money on trivial or uncontrollable factors. On the other hand, too loose a monitoring process may result in lower performance levels.


FAQs About the Limitations in Sales Budgeting

What are the limitations of sales budgeting?

These are a few limitations of sales budgeting:
1. Establishing Need for Budget
2. Having Multiple Views of the Sales Budget
3. Identifying Npas and Planning Events
4. Monitoring Forecasted Figures to Actual Sales
5. Time Interval for Monitoring Sales Budgets.

Read Also  Role of E-Commerce in Selling: Types, Roles