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1. Sales Forecasting 
Sales Forecasting  is the process
of using a company’s sales records over the past years to predict the
short-term or long-term sales performance of that company in the
future. This is one of the pillars of proper financial planning. As with any
prediction-related process, risk and uncertainty are unavoidable in
Sales Forecasting too.
Hence, it’s considered a good practice for Sales forecasting teams to
mention the degree of uncertainties in their forecast. Sales Forecasting
is a globally-conducted corporate practice where a number of objectives
are identified, action-plans are chalked out as well as budgets and
resources are allotted to them.
The first step to proper Sales Forecasting is to know the things that fall
within your domain directly as a salesperson. This usually relates to
your sales staff, clients and prospects. Other factors to consider during
the setup of a forecast are the negative ones like − uncertainty, abrupt
changes in consumer shopping patterns, etc.
One of the most common yet basic challenges that the management of
companies face in making business sales forecasts is that their usual
approach is a “top to down” one. This approach leaves very little scope
for interaction with the sales manager and the salespersons during the
data collection process.

 It is estimated of a company’s sale for a specified future period.

 Sales forecasting provides the starting point o assumptions used
in various planning activities.
 It is used for short term financial control system.
 The financial budget is dependent upon the sales forecasting for
the projected revenue figure.
 Human resource executives use sales forecasting to project
staffing needs.
 It is thus a very vital planning task for any organization.

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 Sales forecasting concept:-

THERE ARE 5 LEVEL OF CONCERN IN

SALES FORCASTING
a. MARKET POTENIAL:- It is the highest possible expected
industry sales of a good or service in a specified market
segment for a given time period.
b. SALES POTENTIAL:-refer to an individual firms market
share of the market potential, where market share is defied
as the percentage of market controlled by a particular
company or product. It is the maximum sales a firm can
hope to obtain.
c. SALES FORECASTS:-is the sales estimate the company
actually expects to obtain, based on the market conditions
,company resources , and the firm marketing plan.
d. SALES QUOTAS:-is a sales goal assigned to a sales
person, region or a team. They are usually derived from the
sales goals and objectives sought by management.
e. SALES BADGETS:-a management plan for the
expenditures t accomplish sales goal.

 SALES FORECASTING PROCEDURES

THERE ARE BASICALLY 3 STEP IN SALES FORECASTING PROCESS

1. PREPARING A FORECAST FOR GENRAL ECONOMIC:-it is

measuring thr GDP, which is the value of goods and services
produced with in a country during a given year. Some of the
other factor are; stock market fluctuation, personal income ,
level of employment, consumer price index etc. These data are
usually available from government or trade association

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2. PREPARING A FORECAST OF INDUSTRY SALES:- Small firms
often rely on industry estimates available from trade
associations and government sources. In other cases more
sophisticated quantitative techniques are used to determine.
Large organizations have economist and analysts who provides
support and information for sales forecasts
3. PREPARING A FORECAST OF THE PRODUCT OR A COMPANY
SALES:- Forecasting methods can be classified as either
qualitative or quantitative. Qualitative methods rely upon
subjective opinions or judgments, where as Quantitative
technique applies statistical methods.

 Product Life Cycle Important sales planning and control tool; it

projects the changes in a products sale/profits that occurs
over time.  

1. Introduction stage –There is no historical sales record and new

products have a high failure rate, so it very important to
prepare realistic estimate of potential sales, based on thorough
marketing research.

2. Growth stage – if the product gains market acceptance.

Sophisticated mathematical models are used here to project
market share and estimate sales.

3. Maturity and Decline stage – traditional forecasting techniques

are appropriate. Historical data can be analyzed statistically to
project sales.

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Product Life Cycle

2. Demand Forecasting
Demand forecasting is a combination of two words; the first one is
Demand Demand forecasting is a combination of two words; the
first one is Demand and another forecasting. Demand means
outside requirements of a product or service. In general,
forecasting means making an estimation in the present for a
future occurring event. Here we are going to discuss demand
forecasting and its usefulness. another forecasting. Demand
means outside requirements of a product or service. In
general, forecasting means making an estimation in the present
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for a future occurring event. Here we are going to discuss demand
forecasting and its usefulness.
It is a technique for estimation of probable demand for a product or
services in the future. It is based on the analysis of past demand for
that product or service in the present market condition. Demand
forecasting should be done on a scientific basis and facts and events
related to forecasting should be considered.

Therefore, in simple words, we can say that after gathering

information about various aspect of the market and demand based on
the past, an attempt may be made to estimate future demand. This
concept is called forecasting of demand.

For example, suppose we sold 200, 250, 300 units of product X in the
month of January, February, and March respectively. Now we can
say that there will be a demand for 250 units approx. of product X in
the month of April, if the market condition remains the same.

Demand plays a vital role in the decision making of a business. In

competitive market conditions, there is a need to take correct decision
and make planning for future events related to business like a sale,
production, etc. The effectiveness of a decision taken by business
managers depends upon the accuracy of the decision taken by them.

Demand is the most important aspect for business for achieving its
objectives. Many decisions of business depend on demand like
production, sales, staff requirement, etc. Forecasting is the necessity
of business at an international level as well as domestic level.

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Types of Forecasting
There are two types of forecasting:

 Based on Economy
 Based on the time period
1. Based on Economy

There are three types of forecasting based on the economy:

i. Macro-level forecasting: It deals with the general

economic environment relating to the economy as measured by
the Index of Industrial Production(IIP), national income and
general level of employment, etc.
ii. Industry level forecasting: Industry level forecasting deals with
the demand for the industry’s products as a whole. For example
demand for cement in India, demand for clothes in India, etc.
iii. Firm-level forecasting: It means forecasting the demand for a
particular firm’s product. For example, demand for Birla cement,
demand for Raymond clothes, etc.
2. Based on the Time Period

Forecasting based on time may be short-term forecasting and long-

term forecasting

i. Short-term forecasting:  It covers a short period of time,

depending upon the nature of the industry. It is done generally for
six months or less than one year. Short-term forecasting is
generally useful in tactical decisions.
ii. Long-term forecasting casting: Long-term forecasts are for a
longer period of time say, two to five years or more. It gives

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information for major strategic decisions of the firm. For example,
expansion of plant capacity, opening a new unit of business, etc.

Following is the significance of Demand Forecasting:

 Fulfilling objectives of the business

 Preparing the budget
 Taking management decision
 Evaluating performance etc.