SALES FORECAST

The sales forecast is typically point of the financial forecasting exercise. Most of the financial variables are projected in relation to the estimated level of sales. Hence the accuracy of the financial forecast depends critically on the accuracy of the sales forecast.
Although the financial managers may participate in the process of developing the sales forecast, the primary responsibility for if typically vests with the marketing department or planning group.
Sales forecast may be prepared for varying planning horizons to serve different purposes. A sales forecast for a period of 3-5 years. Of for even longer durations, may be developed mainly to aid investment planning. A sales forecast for a period of one year is the primary basis for the financial forecasting exercise discussed in this chapter. Sales forecasts for shorter durations may be prepared for facilitating working capital planning and cash budgeting.
A wide range of sales forecasting techniques and methods are available. They may be divided into three broad categories.

* Qualitative Techniques

These techniques rely essentially on the judgement of experts to translate qualitative information into quantitative estimates.

* Time series projection methods

These methods generate forecasts on the basis of an analysis of the past behaviour of time series.

*  Causal models

These techniques seek to develop forecast based on cause effect relationship expressed in explicit quantitative manner.