A sales forecast is a protrusion of reachable sales revenue, based on traditional sales data, analysis of market surveys and tendencies, and salespersons’ estimates. Sales forecasting is a fundamental piece of business management. Without a solid perception of what your future sales might be, you can’t manage your inventory or your money flow or plan intended for growth.
The purpose of sales forecasting should be to provide information that you can use to make intelligent business decisions. It is a crucial part of the financial planning of a business.
Importance of Sales Forecasting:
Sales forecasting is a very important function for a manufacturing concern since it is useful in the following ways:
(i) It helps to determine production volumes considering the availability of facilities, like equipment, capital, manpower, space etc.
(ii) It forms a basis of sales budget, production budget natural budget etc.
(iii) It helps in making a decision about the plant expansion and changes in product mix or should it divert its resource for manufacturing other products.
(iv) It helps in deciding policies.
(v) It facilitates in deciding the extent of advertising etc.
(vi) The sales forecast is a commitment on the part of the sales department and it must be achieved during the given period.
(vii) Sales forecast helps in preparing production and purchasing schedules.
(viii) Accurate sales forecasting is a very good aid for the purpose of decision making.
(ix) It helps in guiding marketing, production and other business activities for achieving these targets.
Your sales forecast is the foundation of the financial story that you are creating for your business. Once you have your sales forecast complete, you’ll be able to easily create your profit and loss statement, cash flow, and balance sheet.