Sales forecasting refers to predicting future sales based on past sales data, market trends, and information helpful for the business. It enables companies to predict their inventory needs, budgetary requirements, and strategic planning. Moreover, through the accurate prediction of sales, businesses can optimise resource utilisation, set realistic goals, and remain financially stable. At London Premier Hub of Training and Consulting, we provide expert guidance on sales forecasting that will prepare participants for successful careers in 2025 and beyond.

What is sales forecasting?

Sales forecasting is the actual process of estimating specific future sales or revenue for a business based on historical sales data, market trends, and so on. It consists of analysing past sales to determine the patterns or trends extrapolated for predicting future sales performances.

Why is sales forecasting important?

Sales forecasting helps businesses plan and make well-informed decisions regarding future operations, marketing endeavors, and resource allocation. Demand forecasting is the major point whereby accurate sales forecasting allows businesses to harness future demand, thereby bridging problems or opportunities and making the necessary changes. Sales forecasting can also help in optimising inventory level, production scheduling, and workforce requirements.

Furthermore, sales forecasting is an important input into financial planning and budgeting by providing data for setting sales targets, establishing budgets, and obtaining resource allocation. Accurate forecasting makes reliable decisions, thus enhancing the financial health of the business. 

Without sales forecasting, the business would be walking in the dark, making it possible for an act of either not having sufficient stock of a popular product or having purchased the stock, thereby losing the perishables or incurring an outright storage cost. Firms that experience seasonal variations in order intake will find sales forecasting most helpful, as it aids the more accurate prediction of demand peaks and troughs.

Benefits of sales forecasting 

The greatest benefit of sales forecasting is that it pushes managers to think about other important components of their operations. For example, defining your sales pipeline may be a big part of putting together a sales forecast. Such software that analyzes the sales pipeline could be valuable in understanding the customer journey, how long it takes, and what your conversion rate is.

Challenges that Arise from Sales Forecasting

Effective sales forecasting requires processing large volumes of data, making it a time consuming and error-prone task. As organisations grow, so does the size of their sales department. Eventually, manual sales forecasting becomes impractical. The sales forecasting software could ensure big time savings for sales managers making accurate forecasts.

Some of the manual sales forecasting challenges are as follows:

1. Wastes a lot of time: Downloading a sales forecast spreadsheet is a very tedious chore and even more so if it’s a wide ranging or complicated calculation forecasting process.
2. Prone to errors: Those many manual entries and formulaic calculations lead to errors in the forecasting procedure. These errors may not get noticed and offset quickly, leading to decisions made with bad forecasts as their basis.
3. Limited accuracy: Various factors limit the extent to which sales forecasts spreadsheets can actually be accurate. These factors include the quality and completeness of the data, the sophistication of the various forecasting models, and the assumptions made during the procedure.
4. No options for flexibility: One such sales forecast spreadsheet is created. There is no possibility of updating it at all to newly found information or changed conditions in the market.
5. No option for collaborative work: It is important to note that if you are a group of people trying to work together on a sales forecasting spreadsheet, the limitation of collaboration will be quite severe, for example when it comes to the number of stakeholders included in the forecasting process and those involved at other levels and/or departments. This leads to versioning issues and less transparency in the forecasting process.

Create an Accurate Sales Forecast

An accurate sales forecast provides a better prediction of an organisation’s income over a given period of time. In fact, it can also be used for other organisational planning areas, such as staffing and even inventory management. The whole process of forming an accurate sales forecast comprises multiple tasks, which we’ve described as follows:

1. History sales data

Obtain as much historical sales data as possible. The ideal would be last year’s data; older data may still have relevance, but this must be weighed against any factors that may have changed over time. If you have grown the sales team, expanded to different channels or territories, or made massive changes to your marketing strategies, those things will change sales figures.

Now, use this data to calculate a sales run rate. This essentially says how many sales you are going to sell over a given period of time the simplest of all sales forecasts. Feeding this data into adaptive forecasting software can help you generate these figures.

2. Coping with alternative scenarios

In terms of uncertain times, alternative scenarios are those incidents. This may include, like, in a case: a recession in the economy of a long duration or recovery within just a short period. Different scenarios will occur with different preparations, so adjusting sales forecasts based on these preparations can come in handy for businesses.

3. Watch your competitors

It’s highly likely you will currently be carefully monitoring your rivals as part of your market research work. And then practically adjacent commercials announce themselves from nearby competition watchdogs.

You can call it from up or down and around another variant of “top-down vs bottom-up” forecasting, depending on whether you would prefer the wider competitive landscape in which your organisation has the capacity to gain market share; up or down can even be simply explained by history, budget, and production availability, used to consider what your company has meant possible in the short time.

When you analyse competition, don’t just stay with your today’s bigger competitors. It asks whether there are other present ones trying to find a market. Knowing these probable threats to your market prediction help you in giving more accuracy to your forecasts.