Sales Analysis and Forecasting

Sales Analysis: The terms ‘sales analysis’ refers to the analysis of actual sales results. This is different from ‘sales forecasting’ as it is concerned with the actual performance of sales not with what they are likely to be at a future date. Since sales analysis a company to identify the areas where its sales performance has been good or mediocre Customers who have brought in bulk, products with high and law sales volume, etc., it is in the company to analyze its sales periodically. A systematic, comprehensive and periodical sales analysis will be helpful to a company to reinforce. Its sales effort where it is most needed. In this way, it can achieve the best possible results. Our discussion of sales analysis is on the basis of four major types, viz. by territory, by product, by customer, and by size of order.

Sales Analysis by Territory

In order to undertake sales by territory one must decide on

• The territorial unit to be taken for such an analysis, and
• What specific information should be collected for this purpose. As regards the territory, the district level is the appropriate choice. Later on, by pooling district data, one may undertake a state or region –wise analysis, depending on one’s need. As regards the data, information on the product sold, such as quantity, price per unit, and total value should be available. This information along with the name and address of the customer is available in the invoice. Thus it provides the essential data on seals and it is not necessary to collect any data separately. However, if additional information is needed, it can be collected through the invoice by incorporating additional items in it.

Once the territory wise sales data are available, it is possible to compare these with the previously set sales target. By such a comparison, territories where actual sales have fallen below the sales target, can be identified. One may probe further into the possible reasons for this poor performance. Is it because these territories face severe competition? Or because sufficient sales effort has not been made in these territories? Answers to these questions will enable the company to boost its sales in weak territories.

Sales Analysis by Product: Sales analysis by product will enable a company to identify its strong or weak products. It is advisable to undertake an analysis on the basis of a detailed break-up of products such as product variation by size, colour, etc. This is because if an analysis is based on a broad break-up, it may not reveal important variations.

When a company finds that a particular product is doing poorly, two options are open to it. One is, it may concentrate on that product to ensure improve sales. Or alternatively, it may gradually withdraw the product and eventually drop it altogether. However, it is advisable to decide on the latter course on the basis of additional information such as trends in the market share, contribution margin, effect of sales column on product profitability. Etc. in case the product in question has complementarily with other items sold by the company, the decision to abandon the product in question has complementarily with other items sold by the company, the decision to abandon the product must be made with care and caution.

Combining sales analysis by product with that by territory will further help in providing information on which products are doing better in which areas.

Sales Analysis by Custom: Another way to analyze sales data is by customers. Such an analysis would normally indicate that a relatively small number of customers accounts for a large proportion of sales. To put it differently: a large percentage of customers accounts for a relatively small parentage of aggregate sales class. An analysis of this type will enable the company to devote relatively more time to those customers who collectively account for proportionately larger sales. Sales analysis by customer can also be combined with analysis both by area and product. Such an analysis will prove to be more repealing. For example, it may indicate that in some areas sales are not increasing with a particular type of customer though they have grown fast in other areas. Information of this type will be extremely useful to the company as it identifies the weak spots where gather effort is called for.

Sales Analysis by Size of Order: Sales analysis by size of order may show that a large volume of sales is accompanied by low profit and vice versa. In case cost accounting data are available by size of order, this would help in identifying sales where the costs are relatively high and the company is incurring a loss. Sales analysis by size of order can also be combined with that by products, areas and types of customers. Such a perceptive analysis would reveal useful information to the company and enable it to make a more rational and effective and effective efforts in maximizing it return from sales.