The Profit And Loss Forecast - Step 2
SALES: MONTH-BY-MONTH ANALYSIS
Once you have determined the dollar amount to be used for your expected annual sales, you must then project how the sales will be spread on a month-by-month basis. This step gives you tight financial control. In addition, it is crucial for calculating each months profit and/or loss and cash flow during the forecast period.
Method 1:Predict each month's sales and use the result. This method is simple and can be of great value if you gather enough data to predict with accuracy.
Method 2:Assume that the relationship of each month's sales to the year's total sales will be the same as the prior year sales. Thus, if last January's sales were 10 percent of last year's total sales, then we can assume that in our current forecast year, January sales will be 10 percent of the year's total. Review the prior year or past years' sales month-by-month to determine the relationship of each month's sales in your forecast to the annual sales. This method may lack some accuracy; however, it is simple to use and will account for any seasonality.
|
|
Example: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Prior year’s sales |
% |
|
Expected Sales |
Monthly Sales |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
January |
100,000 |
6.9 |
X |
1,870,000 |
129,030 |
6.9 |
|
|
|
February |
100,000 |
6.9 |
X |
1,870,000 |
129,030 |
6.9 |
|
|
|
March |
100,000 |
6.9 |
X |
1,870,000 |
129,030 |
6.9 |
|
|
|
April |
100,000 |
6.9 |
X |
1,870,000 |
129,030 |
6.9 |
|
|
|
May |
150,000 |
10.3 |
X |
1,870,000 |
192,610 |
10.3 |
|
|
|
June |
150,000 |
10.3 |
X |
1,870,000 |
192,610 |
10.3 |
|
|
|
July |
125,000 |
8.7 |
X |
1,870,000 |
162,690 |
8.7 |
|
|
|
August |
100,000 |
6.9 |
X |
1,870,000 |
129,030 |
6.9 |
|
|
|
September |
150,000 |
10.3 |
X |
1,870,000 |
192,610 |
10.3 |
|
|
|
October |
100,000 |
6.9 |
X |
1,870,000 |
129,030 |
6.9 |
|
|
|
November |
125,000 |
8.7 |
X |
1,870,000 |
162,690 |
8.7 |
|
|
|
December |
150,000 |
10.3 |
X |
1,870,000 |
129,610 |
10.3 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
1,450,000 |
100.0 |
|
|
1,870,000 |
100.0% |
|
|
|
|
|
|
|
|
|
|
|
Method 3:If you select sales by product, the monthly sales will be spread over the forecast based on the products to be sold each month.
Method 4:If you are forecasting sales by customer, you will spread sales in the same manner as Method 2 above, except it will be done for each customer.
Source: Harvey A. Goldstein, CPA , Granville Publications