O2C – Sales Forecasting Internal Audit Check Points

What is sales forecasting?

Just like any business plan or strategy that the company sets, sales forecasting is an important aspect of achieving that set plan or strategy. Most of the time an internal audit is not done on the sales forecasting, because there’s a misconception that sales forecast is based on predictions done by the sales managers. In reality, sales forecast is driven mostly by data from the past either from their own organization or their competitors or based on the pulse of the market. There’s definitely decision-making aspect involved in this and of course a very ambitious management sometimes forecast sale a lot higher than the sales managers can achieve. Let’s jump into the check points for sales forecasting while auditing O2C process. If you’ve doubts or wish to understand the general O2C process click here.

Considering this area runs on judgment and interventions from top management more often than not it would be preferable to assess certain aspects with care as questioning on the decision of top management can be very sensitive and it’s always preferable to stick to logic than to try and enforce a suggestion you felt would be best for the organization. Let us understand if the Sales Forecasts are accurately computed:

Relevant parameters have not been defined for developing sales forecasts:

• Review if parameters for developing sales forecasts have been defined. Verify that factors such as seasonal demand, market analysis, competitor intelligence and previous year sales etc. are also considered while developing sales forecasts. Obtain an understanding of the defined parameters and review whether they are appropriate. While this is assessed understand from the concerned sales managers as to why certain aspects of it were not considered.
• Verify that parameters to be considered for developing sales forecasts are reviewed by management on a periodic basis. There are lot of external factors that affect the business, for example Covid19 reduced the business all over the world.

Sales forecasting parameters are created/modified by unauthorized personnel:

• Obtain an understanding of the DoA matrix and process for granting, reviewing and removing system access rights for updating sales forecasting parameters.
• Review system access rights to verify if the access to create/ modify/ remove sales forecasting parameters has been restricted to authorized personnel only.
• Understand whether system maintains a log of sales forecasting parameters created/ modified and ascertain whether the log is reviewed periodically. Obtain copies of this review to test authorization as per DoA. If the same is not as per DoA, understand if there were any exception approvals from the Management to do so and it is only one-off, not recurrent in nature.

Parameters for sales forecasting have been inaccurately updated in the system:

• Test check on a sample basis that approved parameters for developing sales forecasts have been accurately updated in the system.
• Review system configuration to verify if there are data validation checks to verify that parameters entered into the system for developing sales forecasts are not incorrect or incomplete. User Access validation would help understand if any unauthorised access is possible.
• Review if the system is configured to perform a maker checker control before the parameters for sales forecasting get updated in the system.

That’s pretty everything you can do in Sales Forecast Internal Audit, although these controls change between different organisations, understand the processes in depth put yourself in the shoes of the sales managers and assess the controls to get the best output. Thanks for reading!