The demand for a product or service keeps changing from time to time. No business can improve its financial performance without estimating customer demand and future sales of products/services accurately. Sales forecasting refers to the process of estimating demand for or sales of a particular product over a specific period of time . While making sales forecasting, decision-makers need to consider both internal and external factors. Likewise , they can estimate demand for a specific product using various sales forecasting methods and techniques. There are a number of reasons why sales forecasting is important for each business regardless of its scale , industry , and region.
7 Reasons Why Sales Forecasting is of Great Importance to Each Business
1. Help Sales Representatives to Meet their Targets
To boost sales and revenue, the enterprises must help and motivate sales representatives to accomplish their objectives or targets. The businesses can make it easier for the sales professional to plan and carry out sales activities by defining his quota or target early and ambiguously. Sales forecasting help businesses to estimate demand for a product and create a business plan for individual sales representatives. There are even a number of sales forecasting methods that help businesses to harness the information provided by sales representatives.
2. Improve and Speed up Product Delivery
While comparing products or brands, customers check the amount of time required by the business to deliver the product. No business can speed up product delivery without manufacturing sufficient products. Sales forecasting helps businesses to manufacture sufficient products by estimating customer demand in advance. Hence, businesses must make sales forecasting to improve customer experience and reduce complaints. Also, they can drive sales by processing just-in-time orders efficiently.
3. Stabilize Inventory Management
In addition to manufacturing sufficient products, businesses also need to monitor and manage inventory proactively. Often enterprises fail to manage inventory efficiently due to lack of information regarding future demand for a product. Inadequate inventory management further makes many businesses to have overstock and stock-out situations. Sales forecasting helps businesses to avoid overstock and stock-out situations by predicting demand for a product accurately and managing inventory proactively.
4. Streamline Supply Chain Management
Both online and local retailers must control all aspects of supply chain to process just-in-time orders and accelerate product delivery. The businesses cannot control supply chain fully without predicting demand for a product and managing the production of the specific product in advance. The sales forecasting methods help decision makers to estimate demand for a product accurately over a specific period of time. Hence, it becomes easier for businesses to manage and control all aspects of the supply chain.
5. Simply Financial Planning
No entrepreneur can run and expand his business in the long run without funding working capital needs and maintaining a positive cash flow position. Often businesses find it difficult to balance cost and revenue due to a lack of accurate financial data. Sales forecasting helps businesses to estimate cost and revenue accurately and early. The businesses can further leverage the financial data to boost marketing activities and drive sales during a specific period.
6. Leverage Real-Time Data
The businesses nowadays collect real-time customer data from various sources. The sales forecasting models help businesses to predict future demand for a product based on real-time customer data. Some models enable decision makers to estimate future sales based on information collected from sales representatives. At the same time, the businesses can use specific techniques to forecast demand by initiating market tests and conducting surveys. There are even a number of sales forecasting solutions that help businesses to integrate the real-time customer data and sales forecasting models seamlessly.
7. Eliminate Chances of Panic Sales
The choices and preferences of customers keep changing continuously. Sometimes the changes in customer preferences reduce the demand for specific products. In such scenarios, enterprises get rid of additional merchandise through panic sales. The panic sales always bring down the prices of products and make businesses incur huge losses. Sales forecasting helps businesses to prevent panic sales by manufacturing products according to future customer demand. Also, businesses can boost sales by planning promotional activities and scheduling mega sales according to the current demand for the products.
On the whole, businesses can estimate customer demand and future sales in a number of ways. The real-time customer data collected from various sources make it easier for enterprises to simplify sales forecasting. But it is always important for the business to decide the right sales forecasting technique and select the right sales forecasting tools to estimate customer demand for its products accurately.
Also read the best practices for retail demand forecasting