The Definitive Guide to Business Finance: What smart managers do with the numbers, Second Edition

Pursuing patterns

Collecting the data

The starting point for analysing your sales record, or any time series, is to collect historical figures for, say, each month or quarter, turn them into a chart, and look for patterns.

It is better to work with volumes (the quantity of widgets) rather than values (sales revenue) because volumes are not distorted so much by inflation, exchange rate movements, price changes and other monetary hiccups. Of course, money does affect volumes (e.g. a short-term price-cutting promotion generally boosts sales volumes). We will come to this later.

Values and volumes

Try to work with volumes (quantities) rather than values (costs or prices), to minimize the influence of monetary factors such as inflation and currency ...