In the ever-changing retail industry, mastering the art of forecasting is key to optimizing inventory management and strategic planning. Lisa McCarthy, chief strategy officer at Out of the Box Technology, is dedicated to helping retailers succeed. She was recently featured on the Let’s Get Retail podcast. With over fifteen years of experience, McCarthy's expert insights offer retailers a blueprint for making informed decisions and working towards operational excellence.
Retailers benefit from anticipating the year ahead. Sales forecasting involves predicting which products will sell and when, a crucial annual practice. Lisa recommends focusing on building a solid sales forecast, as these predictions influence purchasing decisions and affect inventory management.
“If you’re able to predict sales – with some accuracy - everything else is easier. This report is where it all starts, but it’s also the most difficult.”
OLooking into the past is a good first step. Historic sales reports are the best predictor for the future. However, to make a solid forecast, your historical information must be accurate. The historic information may not be absolute, but will give you an idea of:
“The crystal ball into the future is actually a look backwards. There’s typically buying patterns in the retail space - highs at Christmas, Thanksgiving or other holidays,” says Lisa.
Lisa mentions that it’s possible to incorporate AI tools and apps to help do better forecasting. These new tools can scan your files to help gather some predictions based on your historic data.
Inventory management is closely tied to the sales forecast and can be very complex. If you’re selling to multiple channels, big box channels or Amazon, inventory must be kept effectively aggregated and represented to the customer. Even with a clean view of your inventory, fulfillment centers can complicate it. In Lisa’s experience, working with major retailers requires being able to work within their systems. Amazon, for example, has strict policies for its sellers.
Cash is more difficult to forecast because timing is the most important variable influencing it. The time between purchase and sale can be undetermined, impacted by unforeseen implications such as overseas supplier delays or global events that impact product availability and deliveries.
Lisa reminds us that “Retailers have to order product long before selling it.”
Lisa’s client had previously sold to big box retailers, but during COVID, started selling direct. The client got creative with new ways to meet increasing demand. She ran a crowdfunding campaign. With the money raised, she purchased new product, sold it, then repaid the funders with interest. Quick thinking and nimbleness enabled her to pivot and grow rapidly.
It’s good to get an idea of how much you may receive in returned product. Lisa notes that a good place to start is with historic return reports. Her guidance is to apply the same percentage from prior years to get an approximation as a predictor.
Lisa recommends using QuickBooks as a “single source of truth” when your retail business is handling one or multiple channels. With accurate data management, you can pull reports and forecast using trustworthy information.
If you need help with forecasting, or getting set up on the right tools, reach out. Get in touch with Lisa or another QuickBooks Solution Provider for an assessment of how your business can get your data ready for effective forecasting. Check out our retail site for more blogs and podcasts focused on helping you grow your retail business.