Times are uncertain thanks to the COVID-19 pandemic. As a result, 2020 has been anything but predictable. That’s why sales forecasting has become all the more essential in 2021 and beyond.
Sales forecasting is both an art and a science. Nevertheless, decision-makers depend on these forecasts to determine ways to fuel the company’s growth and plan for business expansion. In many ways, sales forecasting impacts everyone in the company.
However, most companies struggle to come up with accurate sales forecasting. Due to inaccurate forecasting methods based on gut feelings and intuition, organizations have poor visibility into their projected sales.
Companies can neither exceed nor undermine their forecasts, or they will end up with missed opportunities.
Importance of accurate sales forecasting
- A sales forecast helps businesses in making smarter business decisions. It can help in overall budgeting, risk management, and business planning.
- Sales forecasts assist the sales team in achieving their objectives by identifying warning signs early on in their sales pipelines. So, they can course-correct before it’s too late.
- A sales forecast enables organizations to allocate resources efficiently for future growth and manage cash flow.
- A sales forecast also helps companies estimate their revenue and costs to predict their long-term and short-term performances.
For seamless sales forecasting, you can invest in an intuitive sales forecast excel template that will help to simplify the process. To some extent, this will even automate the process and make sure that everyone across your company has access to the forecast.
Reasons why you need meticulous sales forecasting
- To foresee and plan for demand
Planning for impending sales is made easier with an accurate sales forecast. For example, suppose you understand how your company’s sales will decrease or increase over the year. In that case, you can plan by hiring temporary staff, maintain appropriate stock levels, and space out projects to free staff who can offer support when there’s an increase in demand.
So, you can be prepared throughout the year to cater to the demands or reduce staff if the forecast says that there will be a decrease in demand. It will help you stay better equipped to handle situations and continue serving customers/clients to the best of your ability.
- To make intelligent business decisions and investments.
Do you wish to invest in a new application, expand your business beyond the current location or hire more staff? These can be excellent investments to help grow your business, but only if you have the funds to make such investments.
Unerring sales forecasting will enable you to predict the funds coming in against the anticipated expenses or costs. Thanks to forecasts, you’ll know when funds will be available to you to invest in the growth of your business without having to sacrifice the day-to-day capital for business expenses.
- To identify problems early on and mitigate them.
Potential issues can be identified and addressed early on with the help of accurate and consistent sales forecasting.
If you consistently review your team’s performance and pipeline, you will likely identify trends that are out of the ordinary. For instance, if your team has been trending 30% lower than where they should be at the point in the month in sales, you can begin an investigation to find the cause of the dip. Some of the factors that may affect your sales forecast either negatively or positively are –
- Changes to the sales and marketing lead process and sales compensation plan
- Changes to your product line or services
- New laws or regulations to your business
- Economic changes
- New competitors in the market
By identifying such things early, you can address them and resolve them as well. Mitigating such issues is crucial for the bottom line of your business. However, if you are not constantly reviewing your sales forecast, these problems and trends might go unnoticed, and when you identify them later on, it might be too late to correct them.
- To augment the process of sales.
When you know how things work, you can identify ways to improve processes and make them work better. For sales forecasting, this is true. When you consistently invest time and effort in forecasting, you start to understand and notice areas in the sales process that take longer than they show or have low conversion rates.
Once these problems are understood and identified, you can take a closer look at the current processes and experiment with ways to improve them. A positive outcome will help decrease the bottleneck in your forecast and ensure a seamless and high-performing sales process.
- To boost the morale of your company.
Sales forecasting impacts every department in your company. It can also affect your overall team. An accurate understanding of sales forecast results in better business decisions, planning, sales processes, and faster identification of problems and mitigation.
Additionally, these aspects allow organizations to offer accurate information to the entire company and offer assurances to employees.
On the flip side, if companies don’t take sales forecasting seriously, it can result in unexpected project delays due to lack of funding, overpromising department budgets, unexpected layoffs, etc. Also, businesses might be forced to pressure employees to generate unrealistic revenue or meet unrealistic cost-saving goals.
The things mentioned above hurt the entire team’s morale and can lead to job dissatisfaction and low work output. On the other hand, accurate sales forecasting will boost employee morale and encourage them to work harder and more productively.
Conclusion
In summation, accurate sales forecasting fuels business growth and improves employee productivity. In addition, it helps businesses to identify trends and problems early on in the project lifecycle so that they can be addressed and solved.
Sales forecasting drives all strategic business decisions and impacts every department in an organization. With the business landscape changing rapidly, a company’s ability to forecast accurately has become more important than ever. It is vital for building an enduring business that can overcome challenges.
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