22.12 Rev1 Sales-Forecasting

8/3/2019 22.12 Rev1 Sales-Forecasting

1/13


2/13

What is Sales Forecasting?yA sales forecast is a projection of the expectedcustomer demand for products or services at a specificcompany, for a specific time horizon, and with certain

underlying assumptionsy Essential tool used for business planning, marketing,

and general management decision making.

y Sales forecasting can help you achieve sales goals.Sales forecasting can help drive sales revenue,improve efficiency, increase customer retention andreduce costs.


3/13

Sales Forecastingy Involves predicting the amount people will purchase,

given the product features & the conditions of the sale.

y Sales forecasts help investors make decisions in

efficient operation of the firm & investments in newventures . Can aid managers on such decisions :

size of a plant to build

amount of inventory to carry

number of workers to hire & their salaries

amount of advertising to place

proper price to forecast in the plan.


4/13

Sales ForecastingProfitability of the company can be improved by :

having a relatively accurate forecast of sales and

costs

properly using the forecast in the plan.


5/13

Objectives of Sales Forecasting

Establish sales performance goals

Predict expenses and planning budgets

Business Assessment


6/13

Methods of Sales Forecasting

A) Qualitative methods

Jury of Executive Opinion Method

Managers within the organization discuss theiropinions on sales in the future

Sales force Estimation Method

Predicts future sales by analyzing the opinions ofsales people as a group. As sales people interact with customers, they develop a knack forpredicting future sales.


7/13

Methods of Sales Forecasting

Time Series Analysis Method

Predicts the future sales by analyzing the historicalrelationship between sales and time.

B) Other complex sales forecasting methods include:

y Statistical Correlation Method

y Computer Simulation Method


8/13

Factors affecting sales forecasting

External Factors

y Seasonality of the business

y Relative state of the economy

y Direct and indirect competition

y Political events

y Styles or fashions

y Consumer earningsy Population changes

y Weather

y

Productivity changes


9/13

Internal Factorsy Labour problems

y Credit policy changes

y

Sales motivation plansy Inventory shortages

y Working capital shortage

y Price changes

y Change in distribution method

y Production capability shortage

y New product lines


10/13

Advantages of Sales Forecasting

y Sales forecasting is an important functionAccurate prediction of future sales efficientoperation helps to plan future business activities &

plays a role in the expansion of a business.y Inventory Management : Sales forecasting assist in

better control of your inventory by preventing :

Loss of sales due to out-of-stock situations

Cost associated with carrying too much inventory.y Customer Information

Sales forecasting allows to identify products as per

customers requirements so as to increase sales.


11/13

Advantages of Sales Forecastingy Use for Sales people

Sales people use sales forecasting as a planning toolto maximize commissions and bonuses. Can under

time their sales calls depending on customersrequirement and save precious time.

y Staffing

Business owners can use sales forecasting formanpower planning by knowing the salesrequirements

y


12/13

Advantages of Sales ForecastingObtaining FinancingBeneficial for obtaining finance for additionalequipment or an expansion by projecting revenue

expected based on past performance


13/13

Disadvantages of Sales ForecastingEven with hard numbers sales forecasting involvesguesswork and needs caution. Sales forecastsdetermine gross income expected and theexpenditures in business.

y Forecast May Be Wrong

y Times May Change

Documents

22.12 Rev1 Sales-Forecasting