Sales forecasting is estimating what a company's future sales are likely to be based on sales records as well as market research. The information used in them must be well organized and may include information on the competition and statistics that affect the businesses' customer base. Companies try to forecast sales in hopes of identifying patterns so that revenue and cash flow can be maximized.
Before the forecasting process begins, marketing, sales, or other managers should determine how far ahead the estimate should be done. Short-term forecasting is a maximum of three months and is often effective for analyzing budgets and markets. Intermediate forecasting is between a period of three months and two years and may be used for schedules, inventory and production. Long-term forecasting is for a minimum of two years and is good for dealing with growth into new markets or new products. Sales forecasts should be conducted regularly and all results need to be measured so that future methods can be adjusted if necessary.
Basically, sales forecasting is analyzing all parts of a business from total inventory to the strengths and weaknesses of salespeople. Managers must think about changes in customer sales or other changes that could affect the estimated figures. They must be competitive when assessing the competition and how they can surpass others in the marketplace to better meet the needs of the target market.
Forecasting analysis involves the use of computer software, which typically includes different sales management categories and also keeps track of different departments. Many software packages have a dashboard format in which charts and statistics are easily accessible on one page. Dashboard software is preferred by many managers over having to look through lengthy reports to find information, since everything is charted and graphed and set out much like the dashboard of a car with its information readable at a glance.
Businesses can customize dashboard and other sales forecasting software to suit their specific needs. For example, sales goals can often be placed on the same page as the chart feature that tracks their progress. Orders and proposals submitted to clients can be tallied and organized. Quarterly revenue flows may be displayed with estimated future revenue for instant progress status. The performance of sales staff can also be tracked.