Sales budget
A sales budget refers to a control document drawn by virtually all organizations for the purposes of monitoring entity’s performance with regard to operations. Based on this, it will be very costly to ignore or have unnecessary assumptions on the forthcoming performance as represented by the figures in the budget.
For successful implementation of budgeted performance, there must be uncompromised cooperation among all the stakeholders of a business, their position in the management rank notwithstanding, for this ensures full dimensional implementation of all the areas highlighted as key for success (Thomas, 2004).
As a direct precaution from relying on information that has not been collected systematically, the company may find itself struggling to make rush production with the sole aim of catering for increases in demand of product which was initially not planned for. On the same point, issues about overproduction arise when those tasked with the processes of affecting the marketing intelligence don’t come up with effective budgets. In this case, misguided optimism leads to the company producing more than its sales force can manage to distribute to all potential customers, making this produce go to waste (Thomas, 2004).
For simplicity purposes, when cases of over production arise, the company will be hoping to make the best out of a desperate situation, which is finding market for the extra goods. The only clear avenue out of this mess will be disposing the goods at a throw away price, since this is the only incentive that can attract the already satisfied market to buy more than they need at any given time. The convergence point of all the above concerns is simple: We need up to date information before making any move on projecting our performance (James, 2011).
Of equal importance is considering the valuation process adopted. It is without any doubt that unit cost guides any cost conscious company in to deciding what quantity to produce at any given time. This is so because the scarce resources the company has cannot allow production of any amount of input, hence making the company settles at a compromise. In this regard, information from the production department on projected unit cost and thorough observation of the prevailing market condition will be very instrumental in projecting the expected changes before any figure on the budget is brought forth (James, 2011).
Further to the above, the administration of an erroneous budget poses a great problem to those tasked with the responsibility since these undertakings are done on strong adherence to the benchmarks. As a desperate precaution from management when the process seems to have veered off the sustainable trajectory, senior management may opt to change the sales staff since they may conclude that they are squarely responsible for all the shortcomings in the market place. Taking a long term perspective of the above issue, it will be costly in the long term since all the changes made to improve are undertaken at a cost (Thomas, 2004).
Sticking on the above issue of work force, there is a cost associated with high employee turnover. Highly guarded information may find its way to competitors since the employee(s) whose tenure is terminated will look for employment elsewhere. It will thus cost more to the company than expected. Owing to the scarcity of capital, any business that is lost as a result of poor approach to planning will be a show of in efficiency, and by all means this can be prevented.If this happens, the company’s goal of guarding its market share while trying to increase on the same will not be effected (James, 2011).
References.
Thomas R. &Paul M. (2004). accounting fundamentals: New York: Mc Graw Hill.
Carl J&James M. (2011).Financial accounting. New Jersey: Cengange learning.
