Factors To Consider In Sales Forecast, Production And Cash Forecast (Part 1 of 3)

To plan, we need to put up forecasts. By doing so, Management can better anticipate major opportunities, challenges, etc that may impact the company’s performance

Managers use economic and statistical techniques to anticipate the future. There are many varied method of forecasting which include Delphi method, econometics, simulation, correlation. Forecasting techniques are qualitative or quantitative.

However, to ensure the success of any forecasting, the following should be considered:

• To get those responsible actively involved and accounted for;
• Statistical evidence and techniques together with managerial judgment should be used in arriving at estimates

Append below a suggested checklist of what factors and the sources might be considered when constructing Sales Forecast, Production and Cash Forecast

Sales ForecastFactors:

• Previous sales activity;
• Demographic statistic related to the sales area concerned;
• Income distribution in sales area;
• Geographical features of a sales area;
• Economic, industrial and political conditions;
• International condition (political, trade and economic);
• Rate of technological change;
• Competition;
• Pricing policy;
• Stage in the life cycle;
• Production capacity;
• Promotion policy;
• Quality, experience, competency of sales personnel;
• Sales trends;
• Costs relating to selling;
• Classification into fixed or variable and controllable or uncontrollable costs;
• Credit policy or terms;
• Principal budget factor;
• Seasonal fluctuations;
• Expected returns on capital employed;
• Market research;
• Profitability of different products; and
• Customer goodwill

Sources of Information:

• Sales personnel whether sales men, area manager,etc
• Market research;
• Past sales volume;
• Economic indicator, journals and press reports; and
• Statistical analysis.