Corporate Sales Budgeting using LRM
26 Apr, by
Corporate Sales Budgetting using LRM.
In any corporate budgeting exercise, sales is the most difficult figure to budget and yet it is the largest figure in the P&L Statement.
Most of the time, we (or rather the Sales & Marketing dept) get it wrong. This can be evidenced by the monthly variances we have always to account for, and explain.
From my experience, the best approach is bottom up ie have the sales staff gather the following year’s expected purchases, month by month, from major customers. We can work on this approach based on the 80/20 rule, to minimize the sting out of the guesswork. But then there are still practical difficulties!
Over the years, I have developed a statistical template for budgeted sales to remove the human guesswork.
This template is based on the Statistical Method: the Linear Regression Model (LRM), and all you have to do is to key is previous year’s monthly sales (adjusted) and the statistically projected monthly sales for the next and future years will appear (like magic!!).
But there will be certain adjustments to be made because future sales do not occur in a straight line!
This new LRM Sales Budgeting Template will be shared when ready.
Please visit my website at www.cfodesk.com.sg at “Free Templates” page.
I have also 4 useful accounting templates (free downloads allowed) for your use, at this website page. https://www.cfodesk.com.sg/templates
Do watch out for my uploading of the free LRM Sales Budgeting Template.