Ask me Anything: Everything You Want to Know About Sales Forecasting

Oct 17, 2018

Sales Forecasting

For any business, sales is the lifeblood. It helps you to pay your employees, buy more inventory, cover operating expenses, attract more investors, and market new products. Sales forecasting is an important part of financial planning for a business. It acts as a self-assessment tool that utilizes present and past sales statistics to predict future performance intelligently.  An accurate sales forecast can help you plan for the future effectively and smartly. Here in this article, we have compiled a detailed guide to help you understand all you should know about sales forecasting.

What is Sales Forecasting?

It is defined as a process of estimating future sales. Sales forecasting tools enable companies to make wise and informed business decisions and predict long-term and short-term performance. Companies can base their predictions on industry-wide comparisons, past sales data, and economic trends. These tools also offer better insights into how a company should manage its cash flow, workforce, and resources.

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Why is Sales Forecasting Important?

Forecasting sales is a key element of conducting any business. It is important for the following reasons:

Sales Planning

Sales forecasting tools help the sales team of any organization to identify and analyze the customers to meet their demands and plan future activities to drive sales.

Demand Forecasting

It helps you to estimate the demand for the products. The sales team of any organization is the front line for the business and gathers information about anticipated demand.

Higher OTIF Delivery

With an accurate sales forecast, you can achieve a higher rate of on-time in full, or OTIF, delivery. The information from sales forecasting tools guarantees that sufficient products will be manufactured or ordered to service customers regularly, resulting in happier customers and lesser complaints.

Inventory Controls

If the sales forecast is accurate, the company can manage its inventory well, avoiding both overstock and stock-out situations. Stable inventory symbolizes better management of your production.

Supply Chain Management

When demand is predicted effectively and the production is managed more efficiently, there is better control over the supply chain. This, in turn, provides opportunities to manage resources and fulfill orders on time.

Continuous Improvement

Continuous improvement is the objective of most businesses. By forecasting sales efficiently and continually, the process accuracy improves and, as a result, all aspects of the business improves.

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What are the Factors Impacting Sales Forecasting Methods?

The factors impacting forecasting of sales are basically categorized into two groups:

Internal Factors

  • Changes in policy
  • Shift in territory
  • Hiring and firing of employees

External Factors

  • Changes in competition
  • Economic conditions
  • Changes in market
  • Changes in industry
  • Legislative changes

What are the Different Sales Forecasting Methods?

Here is the list of different sales forecasting methods:

  • Opportunity stage forecasting
  • Length of sales cycle forecasting
  • Intuitive forecasting
  • Historical forecasting
  • Multi-variable forecasting
  • Pipeline forecasting

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