Preparing a successful sales budget

There is considerable value in reflecting upon past performance. Implementing a process of comprehensive evaluation and review of the outcomes of proposals for expenditure can assist in future planning in several ways. 

In order to conduct such a review, the actual performance of the proposal for expenditure needs to be compared and contrasted with the budgeted projections.Invariably there will be variations in elements of the actual vs. projected outcomes. Most commonly, variations occur when timing and resourcing have been underestimated which has a financial impact that tends to ‘blow out’ the budget. Of specific interest when reviewing and evaluating actual vs. projected outcomes is how quickly were variances observed and how successfully was corrective action taken.

The resulting information can be highly valuable in assisting in the development of future proposals that may have similar intended outcomes. To ensure the most value is received through the review and evaluation of proposals for expenditure it is necessary to compile and share the data of greatest relevance with key business stakeholders that may benefit.

The largest and most significant financial responsibility of retail store managers is the preparation and achievement of sales budgets. Retail revenue is driven by sales of products and services. The minimisation of the expenses incurred in the process of generating sales whilst developing strategies to maximise the sales that are generated is the challenge. Budgets are a guiding tool that allow for straightforward comparison between actual performance and desired performance. Rather than being perceived as a burden, budgets are best considered as a tool that helps business reach their targeted goals.

The preparation of budgets is a key responsibility of the majority of retail store managers. Efficient and effective budget preparation can be an investment in business performance and help galvanise store sales teams toward a common goal. Budget preparation may occur differently across varying retail businesses however the overarching principles are the same.

The extent to which retail store managers are required to prepare all elements of their budget depends upon the business size and structure. Generally, store managers employed by national or international chain are likely to have less transparency across all elements of the budget and may only be required to project sales and develop strategies around the minimisation of variable expenses such as payroll. Smaller stores, certainly those where an owner manager is in charge, will have more comprehensive budgets.

Preparing and producing a budget may involve:

· Analysing inputs and outputs

· Gathering and analysing information from last year’s budget

· Considering any increased fixed costs such as rent, power or fuel

· Taking into account new efficiencies and cost controls; for example improved e-business systems

· Considering industry trends or forecasts that may impact costs

· Checking for government legislation that could impact costs

· Considering changes such as increases in the consumer price index (CPI)

· Calculating and summing expenditure

· Creating a budget form

Government policies and legislation that may need to be considered include:

· Taxation law, including GST

· Superannuation Guarantee

· Awards, workplace agreements, and other industrial arrangements

· Workplace health and safety

· Workplace relations

· Workers’ Compensation

· Industry Codes of Practice

· Transport, storage and handling of goods

· Australian Competition and Consumer Commission provisions

· Trade Practices and Fair Trading Acts

Many of these stipulate certain safety practises and operational procedures for staff which can add extra costs to the daily overheads of a business, for example, conditions surrounding a return to work for an injured worker.

When producing a budget it is best to start by clarifying the outcomes (output) expected from the store or department. Then assess the expenditure (inputs) required to produce the outcome.


Looking to up-skill your retail and visual merchandising skills? The ARA Retail Institute offers a Diploma of Retail Merchandise Management. This qualification reflects the role of individuals who undertake retail merchandise management activity to deliver profitable results for a retail organisation. They analyse merchandise performance results and follow an organisational strategy to plan and enhance ongoing merchandise performance. Click on the link below to register. 


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