Preparing for the next business year entails a multitude of planning. Forecasting sales figures is a common place to start – estimating the type, quantity and quality of future sales.
The purpose of sales forecasting is to help you develop and improve your strategic plans for the upcoming year by increasing your knowledge of the marketplace. A realistic idea of what your future sales are going to be will help you manage your inventory and cash flow so you can accurately plan for growth.
If your forecast indicates an increase in sales of products or services, you may wish to begin searching for larger business premises and/or hiring additional staff to meet the demand. On the contrary, an indication of decreasing sales will prompt a need for such measures as reducing expenses or reorienting your marketing efforts.
What are the basic stages of the sales forecasting process?
A sales forecast can be compiled for a monthly, quarterly, six month or annual period of time. While there is a lot of variation on a practical level, all forecasts generally follow the same process:
1. A problem or data point is chosen
This can be something like: “will people buy a high-end coffee maker?” or “what will our sales be in March next year?”
2. Theoretical variables and an ideal data sets are chosen
This is where the forecaster identifies the relevant variables that need to be considered and decides how to collect the data.
3. Assumption time
To cut down on time and data needed to make a forecast, the forecaster need to make some explicit assumptions (based on data gathered) in order to simplify the process.
4. A model is chosen
The forecaster picks the model that fits the dataset, selected variables, and assumptions.
Using the model, the data is analyzed and a forecast is derived from the analysis.
The forecaster compares the forecast to what actually occurs to tweak the process – identifying problems or, in the event of an accurate forecast, to pat themselves on the back.
What key points of interest help compile an accurate sales forecast?
Standard opportunity, lead, prospect and close definitions. Everyone needs to agree on when and how to count leads at every stage of the sales funnel. The stages of a sales process refer to a probability of the sale taking place and enable you to analyze and manage a portfolio of sales opportunities.
A documented, structured sales process. Predicting the likelihood of an opportunity closing is only possible if your reps are consistently using the same stages and steps. The easiest way to automate the entire document workflow of your office is to deploy a trustworthy digital document management platform.
Automating data entry with PDFfiller is an ideal starting point for creating an office culture based on efficiency. This also allows employees to focus on what really matters: business growth and customer experience.
Accountability. Forecasts are only as good as the information you provide. With a secure and transparent document management system, you will ensure that no data used for your sales forecast is lost or tempered with.
A CRM. Reps need a database for tracking opportunities that give you accurate close predictions. DaDaDocs by PDFfiller allows salespeople to take data from the CRMs that they’re already using such as Salesforce, Microsoft Dynamics 365 and bpm’online and make it actionable via document generation.
Sales forecasting is a complex act that involves analyzing data with several approaches. If properly compiled, a forecast can allow businesses to plan ahead of their needs, raising their chances for sustained growth. That’s one function of business forecasting that all investors can appreciate.