All businesses should have a sales forecasting system in place. This process is often a core part of the business’s management strategy, but a major challenge is that forecasts are imperfect and inexact. Sales forecasting is less about predicting the future – although it gives a picture of what to expect – and more about making meaningful assumptions, which you can compare against future results. Every business is different, so what each business looks at to make these informed assumptions will be different, but there are a few things business owners can do to improve the accuracy of their forecasts.
Ensure the Process is Flexible
A business can’t track every sale’s context, terms, and time. Instead, they should have a process in place that can adapt to the various circumstances and contexts of all their sales. For larger businesses, a common mistake is using an inflexible system that takes average sales numbers and uses them as a forecast while trying to improve those numbers in the future.
Instead, business owners and leaders should take into account all the additional factors surrounding their sales and business and include them in the forecasting process. These additional factors could range from changing trends and geopolitical stability to the cost of materials and supplies and many others.
Use Multiple Sets of Numbers
A common misconception about sales forecasting is that you need only one set of numbers to do the forecasting. The reality is that there is usually no one set of data that can act as a single source of data for the business because businesses are composed of different departments and moving parts, all of which produce their own numbers.
Multiple forecasts borne out of different sets of data are, therefore, necessary so the business can cover all its constituent parts and include them as part of the whole forecasting process. All these numbers and forecasts go into the business’s larger sales and operations planning process. To find out how to do this, see SupplyVelocity’s detailed guide on sales and operations planning and implementation.
Your sales department might come up with forecasts meant to meet certain revenue and sales targets, product management might want certain products developed or improved, and finance might want to come up with a revenue forecast. All of these have to be put together to give a cohesive view of the business’s sales future and included as part of the planning process.
Give Your Forecasts Time to Work
Keeping a close eye on your forecasts will not do much and will instead stress you out. The better thing to do would be to give the forecasts time and have periodic reviews. These reviews will tell you if the strategies put in place are working and whether the business’s sales are in line with the forecasts.
Setting aside time to sit down, review all the data, compare it against the forecasts and make concrete plans is where management happens in this whole process.
Planning and putting strategies in place to meet your sales forecasts is great for businesses that want to continue seeing year-over-year growth. It is, however, essential to remember that things change all the time, and tweaking, learning, adjusting, and even scrapping entire plans and strategies are all part of making informed assumptions that are key to business sales forecasts.
