How To Improve Forecasting Accuracy
What Is Business Forecasting?Business forecasting is the process of using data analytics, insights, and experience to make predictions and future business decisions. Virtually every business decision and process is based on a forecast. Some business leaders may not realize they are forecasting, but anything an organization plans is essentially based on an assumption of something happening in the future. This, by definition, is a forecast. Not all forecasts are complex or sophisticated. Educated assumptions about the future are more valuable for the purposes of planning than no forecast at all.
Why Forecast?Forecasting is a necessity to plan effectively, no matter the industry. An accurate forecast establishes guidelines and measurements to lead management, facilitate planning and goal-setting. It essentially creates the critical plan necessary to avoid risks, while helping the organization achieve its goals and milestones.
Top 14 Tips For Accurate ForecastingAs you begin the forecasting process, here are the key elements to consider, and for which to plan, to ensure accurate forecasting:
- Understand the seasonality of your business and product offerings.
- Use historical data as a guideline.
- Understand your customers’ buying patterns and their business strategy for your products.
- Consider all the input from industry experts.
- Understand the economic impact of factors such as supply chain challenges, labor shortages, inflation, and recessions.
- Consider the impact of any changes in the demographics of the sales region.
- Have clear knowledge of the competitive landscape.
- Understand the target market/customer base relative to the overall addressable spend and the penetration into each customers’ spend.
- Do not just guess at numbers.
- Make sure your opportunities in your funnel are graduated into stages within the sales cycle and that there is clear delineation on the time limits for each stage.
- Make sure you only forecast qualified deals.
- Hold salespeople accountable for their forecasts.
- Consider incentives for accurate sales forecasts.
- Stay engaged with the customer and the opportunity all the way to conclusion.
Why Technology Matters In ForecastingTechnology makes forecasting easier and more automated, allowing business leaders to focus their valuable time and resources on making the best decisions for their organization. A leading software solution will provide:
- Flexibility & Accuracy – You should be able to quickly and easily change your budgets and forecasts on-the-fly to see the impact of decisions before making them.
- Simplicity & Automation – Look for a solution that has a user-friendly interface and doesn’t require technical experts to create and maintain budgeting and planning.
- Instant Visibility – You will need real-time insights with the ability to drill down into the details.
- Streamlined Collaboration – Information silos must be broken down and planning aligned across every department. A top-notch tool will improve communication among teams.
Jeana has been in the software industry for 15+ years specializing in ERP reporting solutions. She has decades of experience in creative content development and marketing and enjoys exercising, traveling & spending time with her husband & twin boys.