FREE online courses on Refresher on Financial Planning - Chapter 1 - The Sales Forecast

 

In order to develop budgets, we will start with a forecast of what drives much of our financial activity; namely sales. Therefore, the first forecast we will prepare is the Sales Forecast. In order to estimate sales, we will look at past sales histories and various factors that influence sales. For example, marketing research may reveal that future sales are expected to stabilize. Maybe we cannot meet growing sales because of limited production capacities or maybe there will be a general economic slow down resulting in falling sales. Therefore, we need to look at several factors in arriving at our sales forecast.

 

After we have collected and analyzed all of the relevant information, we can estimate sales volumes for the planning period. It is very important that we arrive at a good estimate since this estimate will be used for several other estimates in our budgets. The Sales Forecast has to take into account what we expect to sell at what sales price. 

 

EXHIBIT 1 - SALES FORECAST

 

Product                   Volume                   Price             Total Sales

Lace Shoes    16,000          $ 45.00                   $ 720,000