2.2 Financial Planning Flashcards
Sales Forecast
prediction of the expected level of sales volume/revenue for a business for a future period
Purpose of Sales Forecast
-can accurately plan production and estimate how much of a product they will need to produce to meet demand
-Helps business manage inventory levels more efficiently
-Allocate resources more efficiently
-Important for budgeting & financial planning
-Identify trends & patterns in customer behaviour
Factors affecting Sales Forecast
Consumer Trends
Seasonal Variations: chnages in consumer behaviour and spending habits that occur in response to different seasons
Long-Term Trends: changes in consumer behaviour & preferences that occur over long period, trends can be influenced by changing demographics, tech advances e.g. increase in consumers using online retailers
Factors affecting Sales Forecast
Economic Variables
Economic Growth: if economy is growing consumers may have more disposable income, which can lead to increased sales in business, on other hand during recession consumers may be more cautious with spending e.g. 2008 Finance crisis , 800,000 business closure
Interest Rates: higher in rates can lead to reduced spending, lower in rates stimulate it e.g. COVID 19 in rates decreased, boost in sales
Inflation:can impact consumer purchasing power + demand for goods, if rate high consumers more hesitant to spend £ e.g. 1970s+1980s high inflation
Unemployment: if rate is high consumers have less £ to spend, reduced sales, impacts spending power + demand e.g. COVID 19
Exchange Rates: if bsuiness’ home currency is strong compared to currency of operation country, sales may be -vely impacted as prices more expensive for local consumers, if home weak sales are +vely impacted, SPICED
e.g. Uk leaving EU=decreased value of £
Factors affecting Sales Forecast
Actions of Competitors
e.g. if new competitor with better product at lower price, sales of current decrease
on other hand, if comp struggling, take advantage and market share
Difficulties of Sales Forecasting
- New business may not have required historical data, inaccuarcy
-Hard to predict sales , depends on outside factors like economy, customer trends, actions of comp
-seasonal fluctuations, hard to predict
-Markets can by dynamic
-Takes lots of time, money, knowledge to predict, smaller businesses may struggle
-external factors change economy
Sales Volume
-measured by counting
-no. of units of product/service that business sells in certaina mount of time i.e. month, year
Sales Revenue
price x quantity of output
amount of income for a business generated from its sales over certain period of time
Fixed Cost
-costs that dont change when output/sales change, typically incurred over certain period ot time
Variable Cost
