A sales forecast is an essential tool for managing a business of any size. It is a month-by-month prediction of the level of sales you expect to achieve. Most businesses draw up a sales forecast once a year. Armed with this information you can rapidly identify problems and opportunities, and do something about them.
For example, accurately forecasting your sales and building a sales plan can help you manage your production, staff and financing needs more effectively and possibly avoid unforeseen cashflow problems.
By predicting specific sales, you’re forecasting what you think will be sold. This is generally far more accurate than starting with a target figure and then trying to work out how to achieve it.
The completed sales forecast isn’t just used to plan and monitor your sales efforts. It’s also a vital part of monitoring your cashflow.