Empower Your Banking Sales Forecast Automation with airSlate SignNow

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this is going to be quite a brief video looking at the process of sales forecasting as part of the business planning process so sales forecasts are going to be based on predictions in terms of the quantity of a product that a business thinks they're likely to sell and from that they can then calculate and work out their sales revenue or their income by coupling that with how much they're selling each product for their selling price and that's then going to be really useful for them to help in working out what their forecast profit or loss is going to be if they couple that revenue information with their costs and clearly profit is the main objective for most businesses and so that's a really important forecast to be able to make it can also help with cash flow forecasting so this is a really critical part of business planning we looked at this as part of our financial planning topic and by looking at sales forecasts in terms of the income the revenue that's coming in that's going to be for any business the biggest cash inflow for them and so that is is going to help them to then construct all the rest of their cash flow forecast it can also help with staffing and creation of human resource plans so the more sales the business is expecting to make uh the more staff that are going to be required in order to to produce that output and then finally it's no good having demand for a product if that can't be met with supply so by making forecasts for how much they're likely to be able to sell a business can then work back and plan the required level of production in order to meet that demand now once a business has made its sales forecast i think it is really important to be aware there are a huge range of factors that will affect this forecast and how accurate it's likely to be and so they'll need to be flexible and to be able to adjust to these different factors so consumer trends could cover a really wide range of different things demographics is to do with the structure of the population which changes over time and that's going to change consumers demand for different products or services in even kind of smaller things like tastes and fashions so in recent years we've had a really big rise in popularity of vegan foods and so that would have had a big impact on producers of vegan foods and probably they would find that their sales were much higher than they anticipated and even as well a knock on impact on producers of more meat based products because they might find some of their customers moving across to more vegan alternatives economic variables cover a lot of different things and we're going to look at these in much more detail in a different video but just to give a couple of examples um inflation can lead to a big rise in uncertainty if there's a spike in inflation and that could lower consumer spending if they're not too sure about what's happening in the future if inflation's a bit higher if interest rates were to fall for example and that's going to give consumers cheaper borrowing it's going to reduce the amount they're going to have to pay on their mortgages if they own houses and so that might encourage them to spend a bit more and cause sales to be higher than what might have been forecast unemployment and and levels of disposable income so if unemployment is higher then immediately people's income starts to fall and that means that they spend less so all these different factors that's going on in the economy generally can have really big impacts on businesses and their forecasts and you also need to think about what your competitors are doing as well so you might have made your forecast based on a certain situation certain actions of competitors and then all of a sudden they launch a huge great big promotional campaign or they sponsor a really big major event which raises their profile quite significantly so you're going to find maybe some consumers who you might have expected to buy from you they're going to move across and start buying from them or you might find a similar sort of effect if they cut their prices and start offering some really good deals then you're going to lose out on consumers and your sales are likely to be lower than what you might have initially forecast so you can see there just from some of those examples of things that can affect a sales forecast just how difficult it's going to be to predict what's going to happen in the future and forecast your future sales and one way a business might try and do that is to use extrapolation which is looking at past trends and then using that to predict what's likely to happen in the future so if this kind of illustration here was tracking sales on this axis across time on this axis then you could probably reasonably predict that for this red line and this product you you'd be likely to see rising sales moving into the future here maybe for the blue line you'd likely to see more kind of stagnation based on what's happened in the past and but i think the problem with doing this is that just because something's happened in the past doesn't mean it's necessarily going to continue happening into the future and so for this product you might have found quite relatively rapid growth across this period and but it's reached the kind of maturity phase of its product life cycle and it's just going to level off and fall into decline over the next few years and so you've made a prediction based on what's happened in the past that it's going to continue growing and actually what happens is it level levels off and starts to decline and similarly for this type of product there might be a significant change in taste or fashion which cause it to be relatively stable for a number of years and then just to take off into the future so you kind of need to combine this process of extrapolation with a little bit of knowledge as to what's going to happen in the future as well