Sales forecasting

• Definition of Sales forecasting

  To predict future revenues based on past sale figures
• Important tool to support planning and improve the validity of cash flow forecasts
• Use of cash flow forecasts

  • How much staff is needed?
  • How much stock is required?
  • Does the capacity need to be increased/reduced?
  • Does the equipment need to be upgraded, or replaced?
  • How much and which type of finance is required?
  • Is promotional activity required?
• Factors affecting sales forecasts?

  • Consumer trends
  • Economic variables
  • Actions of competitors
• Consumer trends?

  • seasonal variations
  • fashion
  • long term trends
• Economic variables

  • economic growth
  • inflation
  • unemployment
  • interest rates
  • exchange rates
• Actions of competitors 


  • short term actions - promotions
  • long term strategies - expansion/ changes in product range
  • competitors actions are hard to predict - usefulness may be limited
• Difficulties of Sales forecasting

  • too much data - media coverage, competitor advantage, government data
  • future doesn't always mirror the past - the unexpected, economic factors, changes in fads/fashion
  • interpretation - bias/opinion