How to use your sales database to drive your budget

Success in today’s rapidly shifting economy depends on a lot of external and internal factors. When you measure those factors — also known as drivers — it gives you greater insight into how they affect your organization, leading to more efficient analysis, reporting and sales budgeting. Read on to learn how to make your sales database the driver of your sales budgeting process.

What is sales budgeting?

For many companies, sales budgeting is an annual or quarterly process where historical sales data is used as a starting point for some basic predictions of expected sales over the next budget period. These assumptions are often based simple factors like general price increases, seasonal trends, new product releases or staffing changes. However, these types of sales budgets often do not provide enough detail to give a truely accurate sales projection, which can lead to the need for multiple static sales budgets to satisfy different financial scenarios.

It’s often laborious, talking to different parts of the business from the marketing department to logistics to finance to understand their plans and expenditures for a given period, only to end up with a static budget that isn’t detailed or useful. What if there was a better way to bring the sales budgeting process closer to sales forecasts and create plans that were both detailed and dynamic?

An all-in one sales budget example

Instead of sporadic sales budgeting, we recommend using a BI and FP&A platform to create a single, all-inclusive master budget, which integrates the sales budget.

By using the budgeting and forecasting software in the platform means the budget can be driven by a designated sales database that can contain all the sales information you need to match your sales strategies.

Most robust sales databases include all previous sales and sales performance data for each sales department that can be easily linked to sales volumes, sales targets, selling prices per product, number of units sold so the master budget is detailed. The workflows in the software also allow the finance team to collaborate with each sales manager so they can adjust the sales figures or sales price for different sales reps in the sales team.

If you have different divisions or run branches in several locations, there are probably many adjustments the sales managers want to make and finance no longer just refer to past sales data and make flat percentage changes and send it off to them as done. When budgets are created cross-functionally with realistic sales goals, there is more accountability for the sales budget process and sales team take ownership of the numbers as they have an accurate sales budget.

Review actual sales versus budget for every sales period

Another reason to use a BI and FP&A for building a comprehensive budget model is so it can be linked to your financial statements. When the fiscal year commences and the finance team have balanced the first month of sales revenue, it is fast and efficient to compare the actuals sales with the expected sales for that period of time. Having the actual sales readily available lets all your sales team see the market trends and fluctuations and they can quickly take action if the monthly sales budget hasn’t been reached or various customers are meeting the initial sales plan.

Your budget template can be the income statement (profit and loss) and with timely access to new financial and operational data, finance can spot changes in total net sales, giving them clear warning that you will need to review and adjust the sales forecasts.

The finance team and sales managers can track all the budget drivers that have been included in the budget, such as performance of each sales rep.

When you review sales figures for the monthly budget period and see they are substantially up, you can investigate in more detail across different divisions.

For example, you find that three sales reps in America are 40% over target. This makes you remember a conversation you had with the head of sales who suggested some of his people hold back their deals to undermine their forecast and lower expectations. Now that you have seen this in the actuals, you’ll need to check back in with the head of sales in America and increase the targets for these people in the reforecast. Once these increases are made with some quick percentage changes – the system automatically updates all the financial statements showing you the changes to profit in the balance sheet and cashflow statement.

With a BI and FP&A platform, you can quickly incorporate new findings into your forecast.

Make sure you are staying up with current market trends

The headcount tool in the platform allows you to reforecast and address staffing expenses including superannuation, medical benefits and pension requirements. Say you have gone through the quarterly budget and you need to make some changes to staffing levels and whether you need to let people go or hire more, having accurate information is crucial to guiding these important decisions.

A BI and FP&A platform also supports 3-way forecasting, helping you maintain control over cashflow. Mini drivers represent the links between your statements. You use the mini drivers to forecast your Balance Sheet items, so your cashflow better reflects reality. Phocas includes three templates for common scenarios involving debtors, creditors and stock. These templates have pre-built lines with basic inputs for calculation.

There are many benefits to using sales drivers in the annual budget process and keeping an eye on them in each specific period say per week or month.

Using sales drivers in the annual budget process offers many benefits, especially when monitoring them over specific periods —such as weekly or monthly.

The sales drivers put the focus on the key metrics that affect organizational success. Over time you can benchmark how certain sales factors influence total revenue and financial performance. That allows you to make critical budgeting decisions such as allocating more resources, in order to meet business goals.

Over time you can benchmark how certain sales factors influence total revenue and financial performance. A BI and FP&A platform aligns finance with sales which means folks across the organization can have a say in creating an effective budget that improves business performance.

To learn more about using your sales database to drive your budget, download the company-wide financial planning and analysis ebook.