What is the purpose of a sales budget?

The purpose of a sales budget is primarily to project future sales revenue. This budget serves as a financial plan that estimates the amount of sales a company expects to achieve over a specific period, usually a fiscal year. By forecasting sales, the organization can plan its operations accordingly, including preparing for production levels, managing inventory, and ensuring sufficient cash flow to meet operational needs.

A well-prepared sales budget helps management make informed decisions regarding marketing strategies, staffing levels, and resource allocation. It is a crucial component of the overall budgeting process as it directly impacts various aspects of an organization's financial planning and performance evaluation.