Budgeting for Revenue

The revenue budget starts the budgeting process.

The starting point for a budget is to estimate the revenue.


Revenue might be;

  • the sales of a product (for a trader)
  • the hours of service provided (for a service provider like a doctor or hairdresser)
  • the sales of a finished good produced from raw materials and labour (for a manufacturer such a a factory)


The important thing is revenue must be forecasted or predicted.

There is an important relationship to understand!

quantity sold x price = sales revenue


Now rearranging this;

price = sales revenue/ quantity


This is a Sales Budget where the business has three products A, B and C.

sales budget


Now you understand the sales price x sales quantity relationship you can take this further by budgeting for longer periods.

This is a Quarterly Sales Budget for the months of January, February and March and the total of the quarter.


When constructing a sales budget, forecasting might mean that you build on a known figure and increase or decrease that to make a prediction of future sales.


The sales or revenue budget starts the budgeting process.


Once revenue is forecasted, managers can then plan for the business activity of purchasing, producing and offering a service.


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June 10, 2019
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