Sales Forecasting is the process of estimating revenue based on predicting product or service sales over a certain period of time.
Why is sales forecasting important?
Organizations rely on accurate forecasts for almost every part of their business plan. Operations, finance, and supply planning all benefit from a glimpse into the future of sales. Operations can determine their required capacities, finance can budget for hiring and growth, and supply planning can be done to ensure adequate materials and production capabilities.
While other business arms can greatly benefit from sales forecasting, their use of it is predicated on departments being connected and sharing information. Unaligned departments lead to potential losses of revenue due to situations like inadequate or too much inventory.
Some of the benefits of having a connected sales forecasting process include:
- Ability to make informed decisions about the future
- Risk mitigation regarding the sales pipeline
- Alignment of sales and revenue expectations
- Benchmarks to monitor future trends
How to create accurate sales forecasts
There are a few basic steps involved in creating an accurate sales forecast.
- Examine historical trends. Take a look at a previous period’s sales, breaking down the numbers by any relevant variables. Using these numbers, you can create the basis of your forecast.
- Make adjustments based on anticipated changes.
- Customers: Do you have new customers or increased contracts with existing customers? Do you have potential customers in the pipeline?
- Promotions: Are you utilizing any new sales promotions to boost sales?
- Price: Are there changes to your pricing? Have there been changes in the market supply and demand that have affected your pricing?
- Product: Has your product changed significantly recently? Do you anticipate increased sales due to new products?
- Monitor competitors. Examine your competitors’ products. Have they made major changes that could encroach on your market presence? Additionally, take into account any new competitors.
- Account for business plans. If you have hiring plans or are making investments in growth, these may impact your forecast.
With all these examined and included in your forecast, every person involved in planning should be able to have sufficient information to plan for the next year.
Sales forecasting challenges
There are, of course, many possible roadblocks of a successful forecast.
- Subjective decision making. Instead of relying on the analysis of actual business numbers, some decisions are made based on personal judgment. Not only does this ignore credible data, it makes the work put into forecasting wasted.
- Accuracy. When data is stored in multiple places, it creates possibilities for inconsistencies. An untrustworthy process makes forecasts inaccurate and unusable.
Overcoming challenges
Modern sales forecasting software can help solve these challenges. A corporate performance management program solves these issues and provides even more utility.
- Removes any data silos, making sure all information comes from a single source of truth.
- Creates robust data visualization and performance analysis.
- Allows for collaborative work in real-time.
- Models “what-if” scenarios to chart the best course of action.
- Unifies all arms of your business into a single plan.
Why use Kepion for your sales forecasting solution?
Kepion’s Revenue Planning software assists your team in maximizing profitability using powerful features, such as what-if scenario modeling and data integration with many programs. Using Kepion’s calculation engine, your organization saves time by getting revenue predictions based on the information you provide. Historical sales, costs, and any new promotions or discounts all drive the forecasts your team depends on to plan for the future. Learn more about Kepion today by getting in touch with our team.