Summary Sales forecasting

Sales forecasting
Sales forecasting allows a firm to predict future sales, human resources management need,
finance needs, estimate purchases etc.
Advantages:
 Improves cashflow
 Helps manage staffing needs
 Helps ensure you don’t overstock and tie up cashflow
Disadvantages:
 Time consuming
 Based on past predictions so may not be accurate
 Doesn’t take into account economic activity
 Technological change can impact future forecasting




Quantitative methods of sales forecasting involve the use of numerical data collected in the
past which is then used to predict future sales to predict future sales.


Timer series analysis uses evidence form the past sales to predict future sales patterns.
 Seasonal analysis – seasonal demand
 Trend analysis – LT data collected
 Cycle analysis – demand and economic activity
 Random factor analysis


Moving averages can be used to extrapolate data – extrapolation involves taking the past
and extending it into the future.
Advantages:
 Smoothening out data
 Identify trends
 Separates random variation
 Helps with decision making
 Organise resource needs
Disadvantages:
 Doesn’t take into account economic activity
 Doesn’t take into account inflation
 Ignores the actions of competitors