Question

Explain the significance of the sales or revenue forecast to effective budgeting. What strategies might you employ to insure that sales or revenue forecasts are properly constructed to support the budget process?

Answer 1

Explanation

Sales or revenue forecasting plays an important role in effective budgeting. The forecast made, helps in future planning and helps in improving the company's strategic management. It also plays an important role in deciding whether the company should manufacture the products or buy them. Sales forecasting helps in determining the break-even units so that the company donot incurre losses. Revenue forecasting helps in decision making process related to production. Proper budgeting can be used to ensure better profits and lower the costs.

The company can have a saperate management/department working towards sales or revenue forecasts to support the budget process. It also involves the interdependent of various departments within the company. Like sales department helping the production department to ensure that goods are always available for sale and this will then help in budgeting process.