What is a Sales Forecast?

Times are constantly changing – and a sales forecast can help your company to take that into account. But what is forecasting actually? And what is the potential of a good sales forecast? Join in and let me enlighten you.

A brief introduction – all you need to know about sales forecasting

A sales forecast is a qualified guess about future sales. A forecast within sales will indicate what the company expects to achieve within a specific period. In this way, sales forecasting will constantly keep you one step ahead – which can only be a good thing.

A forecast is the same as a prognosis. The purpose of both is to predict the development in sales.

Do you want to learn more about forecasting, what you can use your sales forecast for, and why we recommend you do it? Here it comes.

For what do you use a sales forecast?

Forecasting is an attempt to predict the future. When forecasting, you become more adaptable, as you have valid indication of how the nearest future will look. And that allows you to be ahead of things and make the required adjustments of your business in time.

Today, many companies use rolling forecasts to stay ahead of things. Rolling forecasts present an up-to-date indication of how the future will look. This allows you to manage your business with constant care, as you perpetually follow trends. You will also have time to adjust the budget if that becomes necessary. A rolling forecast provides for updated and valid data, which form the ultimate basis for making fact-based decisions. That is why rolling forecasts let you stay ahead of your competitors.

Why should you work with sales forecasting?

First, you and your company should work with sales forecasting or prognoses if you want improved overview of the expected sales of your company. Forecasting gives you a precise view, the opportunity to establish long-term solutions, and is at the same time resource efficient compared to the conventional budget planning.

The budgeting process may be a lengthy and heavy operation. The manual typing is often time-consuming, risk of typing errors increases, and it takes time to turn the company figures inside out. This is where rolling sales forecasts enter the picture. You will use way less time explaining deviations, which will free resources in the finance department.

Sales forecasting will also give you an insight into the future demand and turnover, which will let you be at the forefront of purchase, production, stock, and personnel manpower. This applies to Haribo, who plans the production of goldbears on the basis of sales forecasts in InfoSuite. In this way, sales forecasting helps generate natural synergies between economic and operation.

Consequently, many functions may benefit from a sales forecast. Your finance department will benefit from knowledge about forecasts when budgeting. Production can use sales forecasts for planning their production. In other words, a good forecast may help in many aspects of your business – which is exactly why you should give priority to it.

What are the typical challenges of forecasting in spreadsheets?

It may be difficult to keep your balance when forecasting, and it can be challenging to make a precise sales prognosis. A lot of companies find accuracy a challenging task, and it often results in lack of trust in the predictions. And it is bad, if the rest of the organisation must plan on that basis.

Issues concerning accuracy often occurs from simple typing or calculation errors, which may end up having large consequences for the decisions made. There are many challenges when making sales prognosis in spreadsheets; obsolete data, requirement of repeated, monthly updates, and not the least lack of overview.

That might be a problem when making complicated sales forecasts. Given you have thousand item numbers, or sale in hundreds of shops, then the process in spreadsheets will be long and difficult. In these cases, companies often begin looking for a more dedicated solution that automates the forecasting procedure.

Why is sales forecasting important?

Sales forecasting is important for your business, as it allows you to point out the future opportunities and challenges that the variations in sales may cause.

Forecasting may also be helpful when companies are unable to control changes in the surroundings. Under certain circumstances, such as monetary crisis or global epidemics, the market is often characterized by extraordinary fluctuations. A running sales forecast can help your business taking these fluctuations into account, as you successively adjust the sale.

It is a useful tool that helps you control and visualise different scenarios. It may also help you identify the opportunities for your company – this is where you spot the potential and get a glimpse of the future.

Guidance for sales forecasting

Forecasting and the knowledge gained about the future must not be seen as the infallible truth, but more to see the opportunities and obstacles that may occur in a future period. Always keep in mind that sales prognoses are without value if neither precise nor founded in your business. Make sure to have access to valid data from relevant data sources.

Sales forecasting should also be a dynamic process – especially when operating in a market characterised by fluctuation. We recommend rolling sales forecasting, i.e., adjusted and updated successively. That will turn your forecasts into a strong planning tool.

You can also draw on different skills and competences. When really succeeding with forecasting, it often stems from the company being able to activate different functions throughout the process. That will make sure you have input from different functions and that the forecasting process is anchored widely in the organisation.

With these pieces of advice in mind, you should be able to create a good sales forecast.

Would you be interested in saving time and resources in the demanding forecasting process? Give us a call and let us discuss how InfoSuite can help.

Are you interested in more information about sales forecasting?
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