Purpose of Sales Forecasts - Edexcel Business Studies PDF

Purpose of sales forecasts Purpose of sales forecasts introduction There are lots of uses of sales forecasts and these are the main ones that the Edexcel exam board would like you to be able to apply to businesses: 1. To avoid cash flow problems 2. To free up management time 3....

Purpose of sales forecasts Purpose of sales forecasts introduction There are lots of uses of sales forecasts and these are the main ones that the Edexcel exam board would like you to be able to apply to businesses: 1. To avoid cash flow problems 2. To free up management time 3. To manage production capacity 4. To employ more workers 5. To start a promotional activity #1 Purpose – avoid cash flow problems Accurately forecasting the sales and building a sales plan can help the business to manage their production, staff and financing needs more effectively and possibly avoid unforeseen cash flow problems A sales forecast will help a business to write the income part of the cash flow forecast #2 Purpose – frees up management time While it's always wise to expect the unexpected, a well- constructed sales forecast can allow the business owners to spend more time developing their business rather than responding to day-to-day developments in sales and marketing Managers will have more time to focus on the rest of the business #3 Purpose – production capacity The business can use a sales forecast to estimate if they need to increase or decrease production – and this will also help them to see if they have enough production capacity to deal with expected demand The business may need to buy or rent new premises if there is a huge increase in sales forecast Watch the video – can you explain how sales forecasts might be used by Amazon? #4 Purpose – employ more workers If the business has high sales forecasts for a new product or service it may need to take on new employees to cope with new levels of demand Failure to meet required staffing levels could result in poor reviews – customer service and this may have an impact on future sales Can you explain how this will relate to Lush? #5 Purpose – to start a promotional activity If sales are forecast to be very low and the product or service is not in the decline phase of the product lifecycle, then the business may decide to try and increase sales though promotion and marketing Sales forecasts can also direct a business to a specific season or month when promotion activity would be likely to net the most sales revenue e.g. Christmas