The world is still struggling with the effects of the pandemic, which continues to make predictable business growth a difficult challenge for most online merchants. For this reason, it’s more crucial than ever for eCommerce business owners to plan and budget more carefully to achieve sustainability long-term. Sales forecasting is one of the best ways to do this.
Companies with accurate sales forecasts have a much greater chance of hitting their quota and are also more likely to achieve year-over-year revenue growth.
If you want to know more, read on for more details about the importance of accurate sales forecasting as shared by your trusted accountants for online businesses:
What Sales Forecasting Is
Sales forecasting is an essential part of the initial planning phase of a business. It begins with the goal of establishing a future income level and detailing the actions necessary to achieve that goal.
The sales forecasting process helps in optimizing the profitability of a business in the long run, and every eCommerce business owner should try it out.
Why It Matters
Sales forecasting is used to ensure that an online business can meet its sales targets. After all, business growth is a core online business success metric. An online business owner may also want to use sales forecasting to figure out how well a new product or service is likely to sell.
Often, a sales forecast is developed to predict how the business will perform over a specified period of time. This period is often based on a specific time frame like a quarter or a month.
Sales forecasting helps in figuring out what the average sales volume is likely to be in the future. The sales forecast may be created by extrapolating the results over a longer period. In other words, the sales forecast may depend on the sales volume from the past season and the current sales performance.
It is widely used by all kinds of businesses. A sales forecast is important for both retail businesses and for businesses involved in eCommerce.
Sales Forecasting Tips for Shopify Merchants
Here are some proven sales forecasting tips for Shopify business owners:
Involve Every Necessary Item
Log each sales order in your accounting software and assess each sale’s effect on your inventory. It’s also possible to make your sales forecast more reliable by incorporating the gross profit margin of each sale into the mix. You can assign each tax rate to a specific sale item. You can also see how much inventory you’ll have to reorder in the future if your sale items sell well.
Check Historical Data
The historical sales pattern and the revenue it generates can help you in forecasting the revenue in the future. Try to figure out how much the sales grew in the last month. In this way, you can set goals for the future and make adjustments when need be.
Stay on Top of Trends in the Industry
Try to keep track of the trends in the industry so you can be sure to have enough inventory to meet the increased demand. It’s also a good idea to know what the end-of-season sales are.
Define Key Metrics
You should develop customer goals for your business for different stages in its life cycle. Analyse past performance based on these goals and then set the new goals for the current season. Make sure to define the key metrics and performance indicators that are necessary to measure the current health of your business. If a goal is not being met, you can then make an intervention to make sure that the goal is achieved.
Use a Consistent Sales Model
Develop a sales model that is based on historical data and then use it for your business planning in the future. It’s also important to determine which metrics are the most critical for your business. Losing a customer who buys from your store two or three times a week can be more damaging than losing a customer who only buys from your store once a month.
Conclusion
Sales forecasting is a useful tool for online business owners. It is a useful tool for assessing the overall health of an online business. Business owners need to make sure that their cash flow is working for them.
Business owners need to make sure that they have enough working capital to cover the cost of inventory, salaries, and other expenses. Sales forecasting can help in establishing the amount of working capital that a business needs to plan accordingly.
If you want to know more about how your trusted accountants for online businesses can help with sales forecasting, you can contact The ECommerce Accountant today.
The ECommerce Accountant is a team of reputable business advisors and accountants for online businesses in Australia that can help your business grow with the help of our tailored solutions. Contact us today to find out more about our services!