Sales forecasting has always been something of a delicate art. After all, there is only so much certainty that can be applied to the technique but increased accuracy has obvious benefits. However, there are some ways to help increase the accuracy of sales forecasting that will help tighten up the process and get the best results:
1. Ensure accurate inventory counting
Without an accurate understanding of inventory, any forecast numbers will be skewed. Spend the time to get a precise accurate inventory count before starting the forecast.
Without an accurate understanding of inventory, any forecast numbers will be skewed. Spend the time to get a precise accurate inventory count before starting the forecast.
2. Review the sales history
Much like inventory, a thorough understanding of past trends must be accurate in order to understand what may or may not occur. Mistakes can result in cash shortfalls that create havoc and cost money.
Much like inventory, a thorough understanding of past trends must be accurate in order to understand what may or may not occur. Mistakes can result in cash shortfalls that create havoc and cost money.
3. Ignore the target
Of course, every company has a sales target that they want to reach. However, this target is not the same thing as a forecast. Separate the sales target from the actual projected forecast. The management and sales team can always sit down later and work on devising strategies to get the target and the forecast more closely aligned.
Of course, every company has a sales target that they want to reach. However, this target is not the same thing as a forecast. Separate the sales target from the actual projected forecast. The management and sales team can always sit down later and work on devising strategies to get the target and the forecast more closely aligned.
4. Look at several scenarios
A sales forecast is typically a blend of several different variables, which include what is the best possible outcome, as well as what is the worst possible outcome and finally, what is the most likely outcome. The forecast is likely an average of all three.
A sales forecast is typically a blend of several different variables, which include what is the best possible outcome, as well as what is the worst possible outcome and finally, what is the most likely outcome. The forecast is likely an average of all three.
5. Consider the pipeline
All sales forecasts are useless without a consideration of what is happening in the sales pipeline. Establish a thorough understanding of what currently exists in the pipeline before trying to determine the forecast and be realistic about the status of every lead.
All sales forecasts are useless without a consideration of what is happening in the sales pipeline. Establish a thorough understanding of what currently exists in the pipeline before trying to determine the forecast and be realistic about the status of every lead.
6. Know the history
Look at the current marketplace as well as what has happened in the past to make a more accurate forecast of what may or may not occur. After all, as they say, those who ignore their history are bound to repeat it. Learn from the past and apply it to the future.
In addition, look at past sales forecasts compared to actual sales and consider just how accurate the assumptions in the forecast actually proved to be. If the forecast was off significantly, establish why and what happened in order to adjust the current forecast to avoid falling into the same pitfalls.
7. Look at the big picture
Finally, take a global picture of the forecast. Consider the past sales history, the current accuracy of the sales pipeline, successful past sales activities as well as unsuccessful activities and a snapshot of customer expectations. When all of these factors are considered, the sales forecast is far more likely to be an accurate portrayal of what is likely to occur. Even if this does not match the sales target, understanding what is compared to what could be will help the sales and management team start creating an action plan to bring the two closer together.
Finally, take a global picture of the forecast. Consider the past sales history, the current accuracy of the sales pipeline, successful past sales activities as well as unsuccessful activities and a snapshot of customer expectations. When all of these factors are considered, the sales forecast is far more likely to be an accurate portrayal of what is likely to occur. Even if this does not match the sales target, understanding what is compared to what could be will help the sales and management team start creating an action plan to bring the two closer together.
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