The Purpose of Sales Forecasts
- Sales forecasts predict future revenues based on past sales figures
- Sales forecasts commonly focus on what will happen in the future to:
- The volume and value of sales
- The size of the market
- Sales as a result of promotional activity
- Sales as a result of cyclical factors
- Sales forecasts are an important tool to support planning and can improve the validity of cash flow forecasts
- Businesses use sales forecasts to determine resource requirements in a variety of ways, including:
- How many staff will be needed?
- How much stock will be required?
- Does capacity need to be expanded (or reduced)?
- Does the equipment need to be upgraded, replaced or increased (or reduced)?
- How much and which type of finance will be required?
- Is promotional activity (e.g. advertising) required - and when?