Sales Forecasts

• Sales forecsat- an estimation of future sales that may be based on previous sales figures, market surveys and trends or managerial estimates.

• Key componenet of the financial planning that a business will undertake. 

• Budgets- If sales are forecast to increase,the business will need to increase departmental budgets for production and distribution.

• Staffing Levels- The business may need more or fewer staff depending on the forecast.

• Production Levels- May need to be increased or slowed down to match the forecast.

• Stock and Purchasing Levels- Again, may need to be increased or decreased.

• Cash Flow Forecasts- Sales will directly affect cash inflow and so any change in future sales will alter the cash flow forecast and level of availability of working capital.

• Profit and Loss Forecasts- Future sales will have a direct bearing on this.

Consumer

• Tastes and fashions will come and go.

• Just because something is popular one year does not mean it will continue to do so.

• Conversely, a sudden rise in popularity as the product becomes fashionable, can increase sales dramatically.

• The size and structure of the market may change over time.

Economic

• Changes in GDP growth rates can affect consumer confidence and spending power which will affect sales. 

• E.g. the 2009-12 recession had a negative impact on people's willingness to spend and reduced the sales of many products and services.

• Inflation, exchange rate variations and changes in interest rates can all affect prices and sales.

• Changes in tax rates or legislation can affect sales. 

Actions of Competitors

• The launch of a new or improved product or a fresh promotional campaign by a rival can affect sales.

Natural Changes

• The weather can have an impact on sales e.g. wet summers have damaged tourism in the lake district.

Changes in Costs

• The costs of raw matierials can be volatile and affect prices and sales e.g. a rise in the price of cotton could see a rise in cotton clothing to higher prices.

• Sales forecasts are based on past sales data with allowances made for known recent market changes. But like all forecasts they can be inaccurate.

• The further ahead the forecasts are, the more likely they are to be inaccurate.

• Inaccurate forecasts can create real difficulties for the business.

• Most of the factors are beyond the control of the business.

• An unexpected fall in sales revenue may lead to reduced budgets; cash flow forecasts may have to be adjusted and more working capital/ additional finance may be needed.

• Actions of a business can also affect the sales forecast e.g. a marketing campaign may be more (or less) effective than planned.