Best Way to Plan the Budget as a Sales Manager

A budget is similar to a forecast in that it is an estimate of future income and expenditure. As a sales manager, your main concern will be with expenditure budgets, that is estimates of the cost of running your department over given periods of time.

Why budget?

It is essential to produce expenditure budgets in order to compare the cost of selling with the estimated sales revenue. This will show the amount of profit that you expect to make. (It may indicate that you will be operating at a loss!) Sales expenditure budgets are normally done on a monthly basis for a twelve month period. By comparing the actual expenditure with the budgeted expenditure, you will be able to keep control and make adjustments if necessary.

Planning the budget

Your budget headings

Firstly, you must decide upon the expenditure headings. These can include:

• salaries
• NI contributions and pensions
• commissions
• car expenses
• hotel accommodation
• telephone
• stationery
• promotion/advertising
• incidental expenses.

Salaries

These are set amounts and only change when salary increases are made, or number of staff increases or decreases.

NI contributions and pensions

National Insurance and pension contributions are normally calculated as a percentage of the salary. Your company payroll department will have the details.

Commission

A percentage of the sales revenue

Car expenses

These can be divided into two types: running expenses (petrol, servicing and so on) and car cost. The latter will depend on how the company purchases cars, outright purchase, leasing, rental and so on. You may also have to allow for depreciation, an amount of around 20 per cent of the list price which is deducted each year. Your accounts department should be able to provide this information.

Hotel accommodation

Companies may either allow a fixed sum, say £50 per night, or reimburse the actual amount spent.

Telephone

Based on past costs with a percentage uplift.

Stationery

As for telephone.

Promotion/advertising

This should be based upon future promotional plans.

Incidental expenses

A sum to cover small, unspecified expenses not large enough to have their own headings.

Contingency

This is a sum to cover unexpected expenditure such as recruitment costs.

As with forecasting, past information should provide the basis for your future budgets. If for example the monthly car expenses were £300, by taking into account any price rises for fuel, servicing and so on you might decide upon a figure of £325 for this year’s budget.

In some circumstances, you may be given one overall figure for the year’s expenditure. Therefore you will need to allocate the amount to the various expenditure headings.