There are three approaches to developing sales expense budgets. Each approach has its own pros and cons. The first approach is called the Historical Approach. And this approach presumes that past activity is a good indicator of future activity. Often the manager examines historical data, and adjusts that data upwards or downwards, reflecting market conditions or other factors. This approach is one of the easiest ways to budget, and is a good approach in relatively stable markets. In fast changing markets, this approach is particularly difficult to use since there can be great deviations from one period to another. The second expense forecasting method is called the Percent of Sales Method. In this approach, sales expenses are obtained by taking projected sales revenue and multiplying that figure by some percentage. Sometimes this percentage is based on historical experience. In other situations, industry data may be used. And this is a particularly useful tool for long range planning exercises. It's also useful in that expenses are set to track with revenue. If revenue is projected to fall, expenses likewise should fall. That said, it may not be the most prudent course of action to cut sales expense in light of falling sales revenue. The third approach is called Objective and Task. And in this approach, one begins with the sales plan objectives and then determines the costs for what must be done to achieve these objectives. Sometimes those costs may be too high, and a firm no longer makes a profit. In those situations, a manager will have to adjust their assumptions and costs. Once a budget is created, a sales manager manages that budget. Each month, or quarter, a sales manager gets a report that compares actual performance with the sales budget. Those line items that deviate from the sales budget are earmarked for managerial inquiry, and in some cases action. Continuous or long-term deviations might require a reforecasted sales budget that reflects new market conditions that have occurred. The key point to remember is that an effective sales manager can only do his or her job if they have a budget.