4.3 Sales forecasting

What is sales forecasting?

• A quantitative technique used to predict a firm‘s level of sales revenue over a given time period

What are the benefits of sales forecasting?

• Drives strategic planning of a business, making more informed decisions about growth and expansion

• Enables organisations to predict, identify and prepare for likely opportunities and threats

• Helps firms minimise risk and uncertainty, if a product isn’t doing well, they are able to pull the product and save money

• Helps businesses to seek trends

• Learning from the past can strengthen an organisation

What are the limitations of sales forecasting?

• Past data and sale trends are not indicative of the future

• Realistic and reliable sales forecasts depend on the ability to collect accurate market research data

• Qualitative factors that affect sales revenue are largely ignored

• Changes in the external business environment can cause large inconsistencies and inaccuracies

What does sales forecasting support?

• It helps to support HR with more information on workforce planning, managers with growth and evolution of the company and the overall efficiency of the firm