Sales forecasts. Flashcards
What is sales forecasting?
Sales forecasting is about predicting the future sales volume and sales revenue based on past sales data and market research.
What does sales forecasting allow businesses to make decisions on?
Finance, marketing and resource allocation/capacity.
How does sales forecasting allow businesses to make decisions on finance?
Sales revenue is typically a businesses primary source of income, so to generate an accurate cash flow forecast, a business must have a general idea on what their sales and revenue will be (inflows). After doing so, a cash flow forecast with aid of a sales forecast will show a business if their sales revenue provides sufficient inflows to operate.
How does sales forecasting help businesses to make decisions on marketing?
Businesses use a variety of marketing methods to drive sales, so sales forecasts contribute to the decisions of the marketing strategies. Sales forecasts can be analysed to see if a business needs more sales, to then ensure the right marketing strategy is implemented.
How does sales forecasting help businesses to make decisions on resource use?
The sales of a business affects their resource use, where a businesses sales volume is inextricably linked to the amount of resources they require.
- Sales forecasts give businesses an idea on exactly how many resources they will need to meet demand, whilst being efficient so that they do not lower capacity utilisation in periods of less demand.
What factors can affect sales forecasting?
Consumer trends, economic variables and competitor actions.
How do consumer trends affect sales forecasts?
Can be fairly predictable and follow patterns (fireworks near bonfire night), but not always certain e.g. science report states red meat is linked to cancer so demand unexpectedly falls.
How can economic variables affect sales forecasts?
(Interest, inflation and unemployment) - all can change incomes and spending. The way in which demand changes depends on a multitude of factors (PED, YED), or rise in domestic currency could reduce international sales for a firm.
How can competitor actions affect sales forecasts?
Competitors could decrease their prices or launch a new product reducing demand for another business - sales fall.
