The Value of Forecasting Software
Whether you are a small business or large corporation owner, sales forecasting software provides extensive benefits to your company. The ability to predict futurecash flow more accurately produces the following advantages-
1. Time saved- The average project manager spends up to an estimated 20 hours a week sorting through sales data in order to forecast sales and create a sales plan for their business. Using software to forecast sales can significantly decrease this time spent.
When your project manager spends less time on your business's sales forecasting they can focus on more involved tasks such as working directly with your sales team to brainstorm sales plan improvements.
Automating large portions of the sales forecasting process can not only save time but it can make the time your employees spend on the clock more enjoyable and productive.
Keep in mind that many business professionals consider data entry and data management highly unfulfilling work tasks. Decreasing the time employees spend on menial data related tasks can improve their job satisfaction and engagement rates, resulting in happier and more motivated team members.
2. Decreased error- A miscalculation or poor financial decision can be deadly for your business's profitability and longevity. Thankfully, forecasting software can decrease miscalculations by over 90%.
Instead of your sales team using less reliable forecasting methods such as intuitive forecasting, sales forecasting software uses historical data to estimate your business's future growth rate without any unnecessary human bias. Rather than being influenced by human emotionality, using software for your business's sales forecast ensures that you are able to make data-based decisions.
Remember, only 7% of sales leaders are able to forecast sales revenue within 5% accuracy. The ability for software to seamlessly evaluate sales data regardless of sales volume in order to calculate sales forecasts with incredible accuracy posits it as an invaluable business resource.
3. Risk management- Proper risk management is crucial for any business that desires long term success and profitability. In order to make sound financial decisions, a business must have a sales forecast that is accurate and accessible.
If your business is too conservative with its sales forecasting you may lose the opportunity to invest in profitable ventures or expand business operations. If your business is too optimistic with its sales forecasting you may mistakenly spend beyond your cash flow capabilities.
How to Build a Forecast on Excel
Microsoft Excel offers its users simple sales forecast assistance that may be beneficial for small business owners but may not be suitable for larger organizations. For some businesses, using Excel for sales forecasting is a low-cost option that utilizes historical sales data to predict future sales.
Useful tips and best practices for using Excel sales forecasting capabilities include-
1. Data entry- Data accuracy is essential for all sales forecasting methods. If you choose to use Excel for your business's sales forecast needs, make sure you are not missing more than 30% of the data points.
The more historical data that you are able to enter into your Microsoft Excel sales forecast, the more accurate your forecasting will be. Designated sales forecasting software programs may be able to transfer your sales data directly from other software programs and avoid the manual data entry that Microsoft Excel requires.
2. Time period intervals- Designated intervals for Excel sales forecasting can be based on different time period intervals, ranging from single monthly sales to entire year sales statistics. Whether you want to predict sales for the next year or the next month, use consistent time period intervals for increased accuracy.
Make sure you do not start your forecast time period too early chronologically, as this can skew your data and create inaccurate forecasts. For seasonal data, Microsoft Excel recommends beginning your forecast before the last historical point.
3. Template charts- Microsoft Excel offers their sales forecast template under the Forecast Sheet selection. The two chart display options in Excel are between a line chart or column chart.
Designated sales forecast software may offer more sales forecast template and display options than Microsoft Excel.
4. Confidence interval- Excel provides its users with a Confidence Interval option in which 95% of future points are expected to fall. This estimate is based off the forecast with the assumption of normal distribution.
You can choose whether to display the Confidence Interval by checking or unchecking it as an option. Additionally, you can also change the Confidence Interval level from its default of 95% by using the up or down arrows.
- Whether you are a small business or large corporation owner, forecasting sales is a crucial business process. An accurate sales forecast assists with a variety of business operations, ranging from sales plan creation and updates to cash flow management.
- While some small businesses may choose to forecast sales using Microsoft Excel, other businesses may require more complex and dedicated software solutions.
- Advantages of using software for sales forecasting range from increased reliability to decreased risk.