Sales forecasts

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  • Sales Forecast
    • estimation of future sales that may be based on previous sales figures, market surveys, trends and managerial estimates
    • key component of financial planning
    • determine:
      • BUDGETS, sales forecast increase, business will need to increase budget for production and distribution
      • STAFFING LEVELS  - business may need fewer or more staff depending on forecast
      • PRODUCTION LEVELS - may need to be increased or slowed down to match
      • STOCK LEVELS - increased or decreased
      • CASH FLOWFORECAST - any change in future sales will alter cash flow forecast and level of working capital available
      • PROFIT AND LOSS - direct bearing on this
    • Limitations
      • based on previous sales figures - can be inaccurate
      • factors are beyond control of business
      • unexpected fall in sales revenue might lead to reduced budgets, cash flow forecast will need adjusted and more working capital needed
    • sales volume - the number of a specific product sold in a given time period
      • sales revenue / unit price
    • sales revenue - income generated from the sales of a product or service
      • selling price X sales volume

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