Sales forecasting is the process of estimating future sales. Accurate sales forecasts enable companies to make informed business decisions and predict short-term and long-term performance. The sales forecast is the estimate of the number of sales to be expected for an item/product or products for a future period of time. Except the industries based on job order, almost all the enterprises produce in advance to meet the future requirements. Thus accurate sales forecasting is essential for an enterprise to enable it to produce the required number of items at right time. So, the question is; What is Sales Forecasting? Meaning and Definition.
Sales Forecasting is explained in Meaning and Definition.
Any forecast can be termed as an indicator of what is likely to happen in a specified future time frame in a particular field. Therefore, the sales forecast indicates as to how much of a particular product is likely to be sold in a specified future period in a specified market at the specified price.
Accurate sales forecasting is essential for a business house to enable it to produce the required quantity at the right time. Further, it makes the arrangement in advance for raw materials, equipment’s, labor etc. Some firms manufacture on the order basis, but in general, the firm produces the material in advance to meet future demand.
Forecasting means estimation of quantity, type, and quality of future work e.g. sales. For any manufacturing concern, it is very necessary to assess the market trends sufficiently in advance. This is a commitment on the part of the sales department and future planning of the entire concern depends on this forecast.
The management of a firm is required to prepare its forecast of the share of the market that it can hope to capture over the period of forecasting. In other words, the sales forecast is an estimate of the sales potential of the firm in the future. All plans are based on the sales forecasts. This forecast helps the management in determining as to how much revenue can be expected to be realized, how much to manufacture, and what shall be the requirement of men, machine, and money.
Definition of Sales Forecasting:
A sales forecast is an estimation of sales volume that a company can expect to attain within the plan period. A sales forecast is not just a sales predicting. It is the act of matching opportunities with the marketing efforts. Sales forecasting is the determination of a firm’s share in the market under a specified future. Thus sales forecasting shows the probable volume of sales.
According to the American Marketing Association,
“Sales forecast is an estimate of Sales, in monetary or physical units, for a specified future period under a proposed business plan or programme and under an assumed set of economic and other forces outside the unit for which the forecast is made.”
According to Candiff and Still,
“Sales forecast is an estimate of sales during a specified future period, whose estimate is tied to a proposed marketing plan and which assumes a particular state of uncontrollable and competitive forces.”
Thus we can define sales forecasting as, estimation of type, quantity, and quality of future sales. The goal for the sales department is decided on the basis of this forecast and these forecasts also help in planning the future development of the concern. The sales forecast forms a basis for production targets.
From above, looking to its importance, it is essential that the sales forecast must be accurate, simple, easy to understand and economical. Thus we can say that a sales forecast is an estimate of the number of sales for a specified future period under a proposed marketing plan or programme. Sales forecast can also be defined as an estimate of sales in terms of money or physical units for a specified future period under a proposed marketing plan or programme and under an assumed set of economic and other forces outside the unit for which the forecast is made.