Question

Q.5.a.Discuss the importance of the sales forecast and items that influence its accuracy. Q.5.b. “Strategy, plans, and budgets are unrelated to one another.” Do you agree? Explain (5+5)

Answer 1

Q. 5.a.)

A sales forecast is the amount of revenue a sales team expects to earn over a given period of time, usually a year. It’s calculated using a variety of criteria including, previous years’ data, market analysis, and sales reps’ output estimates. Accurate sales forecasts allow businesses to maintain healthy growth.

The importance of sales forecast are as follows

(a) Sales Planning :

When your sales reps make their forecasts, they are also planning their future activities, providing each of them with a business plan for managing their territory. Assuming that each of them has a quota to fill, forecasting is the tool that helps them identify the customers to meet their objectives.

(b) Demand Forecasting :

The sales forecast is your best tool to get a good estimate of the demand for the products you sell. Your sales team is the front line for your business and best positioned to gather information about anticipated demand.

(C) Inventory Controls :

The more accurate the sales forecast, the better prepared your company will be to manage its inventory, avoiding both overstock and stock-out situations. Stable inventory also means better management of your production.

(d) Supply Chain Management :

When you can predict demand and manage production more efficiently, you also have better control over your supply chain. This affords you the opportunities to manage resources and take full advantage of just-it-time ordering.

(e) Financial Planning :

Anticipating sales gives you the information you need to predict revenue and profit. Having good forecasting information at your disposal also gives you the ability to explore possibilities to increase both revenue and net income.

(f) Internal Controls :

Having a gasp on the projected production rates for your business makes it possible for you to have better control of your internal operations. By anticipating future sales you can make decisions about hiring – permanent or temporary – marketing and expansion.

(g) Continuous Improvement :

Continuous improvement is a goal of many if not most businesses. By forecasting sales and continually revising the process to improve the accuracy, you can improve all aspects of your business performance.

(h) Price Stability :

With solid forecasting, the good levels of inventories that you maintain will prevent the need for panic sales to rid your business of excess merchandise. Sales may be managed on a thoughtful planned basis.

(i) Marketing

Sales forecasting gives marketing an advanced look at future sales and offers the opportunity to schedule promotions if it appears sales will be weak. In extreme cases, sales forecasts may lead to discontinuing slow-moving products.

In certain cases forecast may become inaccurate. The failure may be due to the following factors:

1. Fashion:

Changes are throughout. Present style may change any time. It is difficult to say as to when a new fashion will be adopted by the consumers and how long it will be accepted by the buyers. If our product is similar to the fashion and is popular, we are able to have the best result; and if our products are not in accordance with the fashion, then sales will be affected.

2. Lack of Sales History:

A sales history or past records are essential for a sound forecast plan. If the past data are not available, then forecast is made on guess-work, without a base. Mainly a new product has no sales history and forecast made on guess may be a failure.

3. Psychological Factors:

Consumers’ attitude may change at any time. The forecaster may not be able to predict exactly the behaviour of consumers. Certain market environments are quick in action. Even rumours can affect market variables. For instance, when we use a particular brand of soap, it may generate itching feeling on a few people and if the news spread among the public, sales will be seriously affected.

4. Other Reasons:

It is possible that the growth may not remain uniform. It may decline or be stationary. The economic condition of a country may not be favourable to the business activities-policies of the government, imposition of controls etc. It may affect the sales.

Q. 5.b.)

The strategh, plans, and budgets are unrelated to one another is disagreable .

The reasons are :

Business plans, strategies, and budgets are essential elements of organizational success.

The three elements are used concurrently and effectively to serve the purpose of the organization.

Strategy, plans, and budgets are interrelated and used together often in a business. Eachaffects the other, and are all necessary elements for decision making.

Strategy is the overarching and unifying roadmap for an organization, while the plans are specific details of how you will reach individual goals or milestones. The budget is determined by how you plan to build the business, how you expect to invest and how your cash flow and debts factor into your business.

Therefore, the statement that strategies, plans, and budgets are unrelated is disagreeable.

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