As with any form of forecast, a sales forecast attempts to predict what will happen in a particular area of a business over a set period. A sales forecast attempts to look forward to how much of a specific product will be sold in a particular market over a specified time frame, such as a month, a set accounting period, or an event like the Christmas sales.
What is sales forecasting?
Using a sales forecast template to create an accurate guide to future sales will enable your business to purchase the requisite stock, raw materials and equipment in advance as well as ensuring you have enough employees to meet the anticipated demand. Although some businesses are in the position of being able to take action based on actual orders, for the majority this form of just-in-time approach isn’t appropriate, and a sales forecast can play a vital role in preparing for the future.
The practical benefits of an accurate sales forecast
The benefits of getting your sales forecast right include not just the ability to plan for the future, but also that being able to point to future sales often plays a vital role when seeking investment in a business. Clearly, past sales figures will support any such attempt to persuade someone to invest in a business, but being able to paint a convincing picture of how these sales figures are likely to develop might be a decisive factor. The other reasons for taking the time to create an accurate sales forecast include the following:
Planning for demand throughout the year
If you’ve worked hard to create an accurate sales forecast that demonstrates how your sales are likely to fluctuate through the course of the year, it will help not only with stock control and inventory, but also hiring temporary members of staff as and when needed and planning non-sales based activities.
Businesses that work in retail, for example, can use past performance to plan for sales peaks such as those which occur over the summer or in the weeks leading up to Christmas.
Investing in things such as new locations, more employees or updated plans can help your business to expand and take advantage of new market opportunities. An accurate sales forecast will enable you to predict when sufficient funds will be coming into your business to meet the costs of the investment that you feel is needed.
Spotting problems as they arise
Having a set of accurate sales forecasts to refer to during day-to-day business will make it easier to spot when something happens that is out of the ordinary. If the sales you are achieving in real time are 35% lower than those which were forecast, for example – and your sales forecasts are generally accurate – then this should provide the signal for you to investigate what might be causing the shortfall. The cause of the change could be anything from a promotion being run by competitors to a shift in the wider economy or a change in how your business is operating. But no matter why it’s happening, an accurate sales forecast will enable you to spot the problem.
An accurate sales forecast could also feed into improvements in the sales process and enable you to communicate positive news on the future of the business to your employees.
We can help
Sales forecasting can help you to plan the smooth running of your business, but only if you’re able to process the payments generated by those sales. Partnering with a payment platform like GoCardless makes it simple to ensure that cash keeps flowing into your business, and this includes the more complex aspects such as dealing with ad hoc payments or recurring payments.