When you create a sales budget (aka sales projection or sales forecast) you are only completing a portion of the budgeting process. Generally, your sales should drive your expenses; however, on occasion you might base your sales projections on how much you need to sell to cover your expenses. The sales budget is the driver for creating a master budget.

A few notes about creating a sales budget:

  1. Be as realistic as possible. While it is always good to create big goals, you want to be able to use this information for making decisions in future months.
  2. A sales budget is not necessarily the same as a cash budget. Many times sales occur before cash is collected.
  3. Use units, where possible. When you create your template have the units and selling price(s) in separate Excel cells that can be easily changed so that you can play with units and/or price to see how your sales budget would change with different variables.
  4. Units are also important because you will use this information when creating the production/operation budget.

Create a spreadsheet with a list your products/services in the very far left column. You will want to list the months at the top of the spreadsheet too. You can create an “assumptions” page or use the current page to track the units to be sold per month. Multiply the units times the sales price for each month. If your business has predictable seasonality this should be reflected in the month units.

A sample sales budget is presented below:

August September October
Budgeted units for product #1 100 110 90
Budgeted units for product #2 50 55 70


August September October
Product #1 at $20 each 2,000 2,200 1,800
Product #2 at $150 each 7,500 8,250 10,500
Total Sales $ 9,500 $10,450 $12,300

Once you have completed your sales budget you should compare your estimates to prior periods. How do the current projections compare to the prior year or to the same month of previous years? Are your sales projections too high, too low or just right? Adjust the units as necessary to create a realistic sales budget.

After you finalize your sales budget you can create a schedule of expected cash flow due to sales, assuming you allow your customers to pay on credit or if you submit claims to insurance. Estimate the percentage of sales collected in the month of sale, the percentage collected the following month and any percentages collected in future months. You’ll use this information to calculate your cash budget after your production and administrative budgets are completed.