The single most important element in the forecasting process is the Sales Forecast. Generally, Sales drives everything else; it is what determines the expense spending plan. If the company is a manufacturing company, the sales forecast will drive the production plan.
There are several different ways to approach Sales Forecasting. Typically it starts with the Sales Department figuring out how much product they can sell in the following year. Sales people are naturally optimistic by nature, usually overestimating achievable sales. There are several factors that can impact the forecast: