Thursday, June 14, 2012

Accurate Sales Forecast Profitability

Why is an accurate sales forecast critical to profitability?

Forecasting sales accurately is critical to profitability of company as its whole structure is knitted against the product or service as company may need to take important steps for required raw material, special arrangement to for production facilities to meet the demand, item stock levels, financial requirements and many others. If sales forecast is poorly conducted by the accountants and managers, that can really effect the financial health of the company for future years.

For example, if the company forecasts ten million units sales in year 2012 and company purchased materials, production facilities expansion to meet produce unit, arranged for financial loans, maintained high levels of stock for both finished goods and raw materials, however, the  company is only able to sell 50% of forecast. There will be big problems that trickle down through the company that could have very drastic effects.

Every department of the company will be affected by missing the sales forecast, and company may need downsizing, or at worst may be unable to pay the debts or dividends.

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