How to forecast future sales?
We do not know our future.We do not know exactly what might happen to our company in the next 2-3 years.The higher level of uncertainty, the higher role of forecasting.How to forecast future sales without underestimated and overestimated Company sales?
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When it comes to forecasting, accuracy is first and foremost. For example, overestimating sales could cost the company spending money on things they don't need like distribution or manufacturing which can restrict their cash flow to pay other important items such as vendors or utilities. Underestimating can be equally as bad because if the company markets a product but they aren't ready to deliver or follow through with it, then other leading competitors can steal their idea and take all the credit.
In order to forecast future sales without over or underestimating company sales, a few things need to happen:
First, is to pick the right method(s) for the company. It may be long or short term, depending on what the sale consist of. An example of something short term is food or hygiene products that are fast moving whereas long term products could be items for a house (flooring, tile, appliances) that would require a time-series technique. Both are important but the type of forecasting is very different.
Another important factor that a company should consider is using multiple methods to understand the reasons why it's being forecasted this way. Just like getting a bid for a new kitchen, forecasting is generated by estimating so the more, the merrier and closer to accuracy you'll get.
Finally, tracking actual data as it comes in and adjusting future forecasts accordingly is another good way to get a better forecast. It will help with adjusting to reflect reality and as each month goes by, adjustments can be made.
