Sales forecasting essentially refers to the prediction of future sales. It utilizes information gathered from your past performance to form a basis for making predictions on future performance. Investing in detailed sales forecasting may help your business in making decisions for the future needs of your business. This is likely to increase the chances of successfully running your business irrespective of the prevailing external factors. Here is further insight into the importance of sales forecasting to your business.
Positive Cash Flow
Correctly carrying out a sale forecast often gives you a basis for making financially sensible decisions. This is especially important in balancing out your incomes and expenses to come up with positive cash flow. Information on how your products performed in terms of sales may help you choose whether to continue producing it in the future. Poorly performing products can be replaced with ones that you perceive to be more in demand. You can thus make necessary cash adjustments to facilitate their production early enough in order to be ready to capture potential clients.
Managing Cost of Sales
The amount you spend on producing a commodity for sale is referred to as its cost of sale. Forecasting sales usually helps you to determine if a product is worth all the expenses it takes to produce it. Predicting the pattern of a commodities’ sale may also guide you in planning for the timely acquisition of components used in its production. Businesses that fail correctly plan ahead of time may run out of raw materials during peak season and may be required to pay extra or scramble for them. Alternatively, sales forecasting helps you to avoid overstocking raw materials during off-peak seasons, which may end-up expiring and incurring you a loss.
Guides You in Staffing
Sales forecasting assists you in managing your staffing needs. It may offer guidance when coming up with a staffing schedule by informing you how busy your business is likely to be at specific times. You can thus have ample time to notify your employees of the expected increase or decrease in their working hours with the associated rise or dip in their wages. This may go a long way in improving your relationship with your employees by also providing time to dialogue or for them, voice their concerns.
Sales forecasting enables a business owner to make predictions intended to maintain positive cash flow, manage the cost of sales and guide them in staffing.