Question

Critical Sales Forecast

• Why is the sales forecast so important in short-term financial planning?
• How does it affect the key areas in a whole organization?
• Which area do you think is most affected by the sales forecast? Why?

Answer 1

Answer A: Sales forecast uses past and current sales of an organization to predict future sales of the Company. It plays an important part reason being companies based on this manufacture products and hire resources keeping this in mind only.

For example, A manufacturing Company will buy inventory, hire labor and other resources like Money keeping in mind this sales forecast only and if this forecast is haywire a lot of the wastage or supply issues could be faced by the Company.

Answer B: Areas it has impact on are:

1.Inventory Department: More accurate sales forecast better control over inventory

2. Financial Planning: Helps you predict profit and revenue

3. Price stability: if you will produce more in anticipation and the sales are less to get rid of extra inventory you will sell it at less price

4. Supply chain management: When prediction is accurate you are able to gauge the resource requirement and delivery more efficiently in the system leading to better delivery TAT

Answer C: Inventory Department is more effected by sales forecast as they have to keep in line with the demand rest all departments are not directly involved but here slight deviation has direct financial implications for the Company in the long run.