2.2-Financial planning

• Sales forecasting


  Predicting future sales volume (number of units sold) and sales revenue/value (amount of money made from sales)

  It is likely to be based on:

  • Past sales data
  • Market research

  However:

  • May be unreliable or inaccurate

  • New businesses have no data to forecast
• Sales forecasting will affect decisions on:

  • Finance- sales revenue is the main source of cash inflow. Sales forecasts will inform what cash inflows are forecasted in the CFF. These need to be accurate to help prevent a business running out of cash
  • Marketing- a predicted decline in sales may lead to a business adapting their marketing mix
  • Resources- a predicted rise in sales will mean more resources will be needed
• What factors affect sales forecasting?

  • Consumer trends- changes in demand at different times (fashion, holidays, etc.)
  • Economic variables- this can have an impact on how much money people have to spend so can affect sales
  • Actions of competitors- their actions may affect sales
• What are the difficulties of sales forecasting?

  • Markets can be dynamic and circumstances can change quickly so forecasted figures are not guaranteed
  • Sales forecasts will require updating
  • A forecast is only as good as the data that is put in it - being overly optimistic or pessimistic will reduce its usefulness
  • The accuracy of the forecasted figures becomes less accurate for longer periods