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4.3 Sales Forecasting

(HL ONLY)

What is Sales Forecasting?

A quantitative method to predict a businesses' level of sales by using past figures and data to extrapolate the current trends or possible sales in the present. It can be inaccurate or outdated due to the historical aspect.

Advantages:

Better Cash flow
- Stock control
- Productive efficiency
- Budget
- Borrowing

Disadvantages:

Limited Data
Inaccuracy - Due to prediction
Relevancy - Due to history
External Influences

Types of Sales Forecasting

Created by: A. Winter ('19)

Factors That Forecasting Methods Depend On

Created by: A. Winter ('19)

Advantages & Disadvantages of Sales Forecasting

Created by: A. Winter ('19)

Example: Acosta Adventures

Moving Averages:

A more accurate method of identifying trends so they are a more useful tool for sales forecasting.

Used to establish underlying trends by smoothing out the variations of data caused by seasonal, cyclical and random variations.

How to do a 3 point moving average:

Work out the mean of the first 3 data sets
Repeat this for the next 3 data items

How to do a 4 point moving average:

Mean of the first 4 months
Mean of the next 4 months
Add these 2 means together and divide it by 2

Explanation:

The green line represents the 3-point moving average which is essentially the sales forecast
The red line represents the real sales which as you can see fluctuates due to the seasonal factor of this business

Next Steps:

Apply a line of best fit to produce the 4th quarter sales forecast and add 0.8 or the variation integer

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