Understanding the process

The sales budgeting spreadsheet usually is the starting point for the budgeting process. This is because inventory levels, purchases, and operating expenses are usually geared to the rate of sales activities. It is essential to get an accurate sales and cost driver activites forecasting in order to get an effective sales budgeting spreadsheet.

In most budgeting processes, the historical performance of a company usually forms the basis of forecasting its future performance. Most big organizations usually practice preparing budgeting spreadsheet for the next 5 years instead of 1. The terms used in budgeting spreadsheet may differ from organization to organization.

Using my own experience as an illustration, the first year is usually called the “Budget” and next 4 years are called “Projections”. Therefore when combine together, it would be 1 Year Financial Budget plus 4 Years Financial Projections. I am using the Top Down Budgeting Method to illustrate how to prepare the sales budgeting spreadsheet for the below example.
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