Budgeting Basics and Beyond

6.1. Comprehensive Sales Planning

Chapter 5 gave an overview of a comprehensive profit plan. The initiating management decisions in developing the plan were the statements of broad objectives, specific goals, basic strategies, and planning premises. The sales planning process is a necessary part of profit planning and control because (1) it provides for the basic management decisions about marketing, and (2) based on those decisions, it is an organized approach for developing a comprehensive sales plan. If the sales plan is not realistic, most if not all of the other parts of the overall profit plan also are not realistic. Therefore, if the management believes that a realistic sales plan cannot be developed, there is little justification for profit planning and control. Despite the views of a particular management, such a conclusion may be an implicit admission of incompetence. Simply, if it is really impossible to assess the future revenue potential of a business, there would be little incentive for investment in the business initially or for continuation of it except for purely speculative ventures that most managers and investors prefer to avoid.

The primary purposes of a sales plan are (1) to reduce uncertainty about the future revenues, (2) to incorporate management judgments and decisions into the planning process (e.g., in the marketing plans), (3) to provide necessary information for developing other elements of a comprehensive profit plan, and (4) to facilitate management's ...