Sales forecasting is key to cashflow control, but it can be difficult for new businesses, because they don't have any past sales figures to go on. Palo Alto Software's Alan Gleeson provides the answers in his beginner's guide to sales forecasting.
Why do so many start ups struggle with sales forecasting?
Most lack experience, and not being able to look at past sales and base predictions on these can make forecasting seem impossible. If your product or service is innovative and new, it is even harder to make predictions of demand. However, there are methods you can use to give you a fairly accurate idea of likely sales.
Why is forecasting important?
Cash is the lifeblood of all businesses – it provides working capital. Many costs must be paid up front, which can create cashflow problems if you’re waiting for money from your customers. Consequently, businesses need to prepare forecasts so they can predict when problems are likely to occur. Then they can arrange an overdraft extension, loan or other finance. Effective cashflow management is crucial.