As a business, you always strive to know what the future has in store for you. Whether it is bright or bleak, having a foresight will help you to plan ahead and avoid the pitfalls that can bring you down.
Sales forecasting is a systematic process of trying to predict the sales volume that a business expects to make during a specific future period.
A forecast is done in both monetary and physical units that a business gets over a specific period. The prediction considers the business program, goals and economic conditions that can influence the sales volume.
Sales forecasting goes beyond just giving mere predictions. It draws a comparison of the opportunities that a company can get if it implements specific marketing strategies. It can also predict a firm's share of the market in the near future.
Factors that Influence sales forecast
In order to get an accurate sales forecast, the following key factors need to be put into consideration:
Forecasting analyzes the general economic conditions that affect both the business and the target consumers. Some of the things that can influence financial situations include inflation, deflation, political environment and past behaviour of the market.
The Nature of Consumers
A forecaster should analyze the various aspects of consumers. The most critical ones include age, sex, size and their economic condition. The analysis of consumers may also depend on the nature of the products that you sell.
Competition in the Industry
While making your prediction, you need to look at the industrial behaviour. How many competitors do you have and what makes you unique? Note that various factors such as pricing and quality of the product can affect the performance of your business, regardless of the predictions.
The Importance of Sales Forecasting
Here are some of the reasons why it is important for a company to carry out sales forecasting:
Supply Chain Management
One of the aspects of sales forecasting is predicting the demand for products. By foreseeing these numbers, you will be able to manage the production of goods efficiently to meet the expected demand. You will be able to allocate the right resources that will streamline the supply of goods when they are in high demand. This way, the benefits will trickle down to the supply chain management.
Proper Financial Planning
You can see the revenue and profits that your business is expected to generate from a sales forecast. This information will also put you in a better position to explore the possibilities of increasing your revenue or maximizing your profits.
Accurate sales forecasts can help you streamline the process of inventory management. As a business, you will be in a proper position to know about the volume of the goods that should be in the market at a particular time. You will also be able to know the number of products that you should produce. In other words, sales forecast will help you to avoid overstocking or under-stocking your goods. This will also streamline the management of the production line.
Sales forecasting has an impact on different internal operations of a business. By looking at the figures on the sales forecasting report, you can make various internal decisions. Some of these include the number of people to hire, how to organize different departments and how to reorganize your staff.
Helps to Manage the Sales
Sales reps can use the data from the forecasts to plan their future activities. If the forecast predicts an expansion in the market size, sales reps can look for ways of how to reach out to consumers in the new market. The sales department can also use the forecast to improve its efficiency.
Stabilizes the Price
Sales forecasting can help to stabilize the price of your products through a streamlined inventory system, which prevents the chances of initiating panic sales due to low demand or excess products in the store. Forecasting ensures that for each product that is produced, there is a consumer who is ready to buy it.
Accurate sales forecasting can help you to deliver products to your customers whenever they need them. The data from the predictions ensure that you produce enough goods in anticipation of the high demand. This will enable you to deliver the products timely, which in turn, will improve customer satisfaction.
In conclusion, sales forecasting has an impact on every aspect of the organization. You can use the data in the sales forecasting report to make critical decisions that will determine the future of your business.