Keeping track of key sales and inventory forecast metrics takes the guesswork out of business planning and goal-setting. With the right data at your disposal, you can form a realistic picture of projected sales and revenues over a defined period, and keep an appropriate level of inventory on hand to meet customer demand.
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Here’s how to start sales and inventory forecasts, and the fundamental forecast metrics you should be tracking for each.How to start a sales forecast
If you sell across more than one platform (on your website and on Amazon, for example), you’ll need to define each sales channel so that you can start to create a sales forecast that is accurate for each place you plan to sell.
If you have accurate information on sales over the last year, start by using this data to make educated guesses about the level of sales you’ll be making in the future. Note down any periods of seasonality or variability in sales that deviate from the norm.
Although you won’t have any previous sales data for new products you plan on introducing, it’s worth looking to similar products as a guide for how those new products will perform. For example, if you sold a printed t-shirt last year, you might use the historical sales data for this shirt to predict sales for a new print at a similar price point.
Your sales forecast will allow you to plan most effectively if you include projections up to at least 12 months in advance.
Once you have the basis for your sales forecast in place, you should define and track the following metrics over the entire forecast period:
To make life easier, consider using a forecasting model like TradeGecko’s free sales & inventory forecast template, which automatically populates total sales revenues and margins based on your initial sales-per-product inputs. It saves time and ensures the data you’re seeing is accurate, plus it generates graphed reports to make understanding the data easier.
Planning for inventory relies on knowing how many sales you can expect to make in the future. Once you have your base sales data in place, start by determining the number of products you’ll need in stock to meet demand.
Look to the past period’s inventory fluctuations, including any stock-out or overstock periods, and note down any likely future variability in inventory.
To make sure you actually have enough stock on hand when a sale is made, work out how long it takes for you to receive stock after a purchase order is made.
Along with your sales forecast metrics, you should also outline and track the following inventory metrics:
*TradeGecko’s inventory and sales forecast tool automatically populates appropriate inventory purchases and the cash required to make those purchases based on your data from the first four metrics.
As we’ve seen, sales forecasting is imperative to effective inventory management. Accurate sales data can be used to inform your procurement strategy so that you have just enough stock on hand to meet sales demand – resulting in a high inventory turnover rate and low inventory holding cost.
Additionaly, inventory forecasting is essential to ensuring you have products in stock when those projected sales eventuate – maximizing profitability.
Download TradeGecko’s free sales and inventory forecasting tool.
Track inventory, sales, and forecast revenue with the Sales & Inventory Forecast Tool.