What is a Sales Forecast?
A sales forecast is an estimate of what a business thinks its sales will be for some future accounting period and is often used as the basis for a business plan financial projection.
Its purpose is to enable corrective action to be taken if the business is not going according to plan.
A sales forecast is different from a sales budget. A budget is the sales level the business wants to achieve for the accounting period, it is a target to aim for. In contrast, the sales forecast is the sales you expect the business to achieve for the accounting period.
For example, a business at the beginning of a year might budget its sales at 100,000 for the year. The 100,000 is the target it hopes to hit, it is what the business is aiming for, and it will set out various plans as to how it can achieve the sales budget.
Part way through the year things might not have gone to plan and the business is moving away from its target, it might estimate, based on what it currently knows, that the sales forecast is only 80,000. Based on this sales forecast, the business can either take corrective action to bring the business back onto target, or it can amend the target and revise the sales budget down to 80,000.
Additional information on sales forecasting can be found in our how to prepare a sales forecast tutorial
For further information see the Wikipedia sales forecast definition.
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