Preparing an Operating Budget—Forecasting Sales and Revenues

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Documenting revenue forecasts

Historical data, existing order backlogs, and information about the sales pipeline can be helpful in estimating how new sales volume might be distributed during the budget period. If necessary, create a monthly schedule to clarify how sales volumes and revenues are expected to fluctuate during the year. Doing so will help prevent overly optimistic forecasts.

Since revenues are a function of units sold and price, you will want to document quantity and price assumptions used in developing the revenue forecast. Be aware that production constraints may affect the revenue budget. If, for example, sales demand is expected to exceed capacity, then the revenue budget is adjusted to match the production constraints rather than the actual demands of the market.

Be prepared to defend your assumptions, especially if you are also evaluated based on achieving budgeted revenue targets.

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