Every business owner knows that money makes the world go round. Finances tie into every aspect of your organization and its ability to succeed. Whether hiring employees or selecting new software, your decisions require a clear understanding of your company’s financial health. While budgeting and tracking sales can provide some insight, these resources will fluctuate as generating revenue tends to change from one period to the next.
When you don’t have a clear picture of your earnings, it complicates your decision-making, causing you to make choices that may not be economically ideal for your business. More importantly, it can limit your ability to acquire capital from investors and lenders. The good news is there’s a solution, sales forecasting. Continue reading to learn more.
What Is Sales Forecasting?
Sales forecasting is the process of predicting how much your company will make in a given period (monthly, quarterly, or annually). Forecasting isn’t a guessing game; it’s an accurate estimate derived from various data points and sources ranging from historical data to the sales funnel. As input data to generate an accurate forecast falls under multiple departments and platforms, many businesses rely on a sales forecasting tool to streamline the process.
Why You Need Sales Forecasting
Why would you want to estimate sales for the future? Below are a few reasons why sales forecasting matters to your business.
Create And Accomplish Company Goals
Having company and departmental goals are essential. They help you and your team keep their eyes on the prize. It gives you direction and keeps you focused on the task at hand. Goals are also great for motivation and productivity. When you make realistic data-backed estimations of where you’d like to be financial, you can take actionable steps towards accomplishing your goals.
Tweak Or Develop Processes
Comparing your projections to company performance makes it easier to identify problems within your operations. For instance, if you notice a decline in sales over the past quarter, you can address the matter with customer service managers. You may learn that they’re understaffed and need assistance to keep up with the influx of calls. Ultimately, you can decide if you have the means to hire more reps.
The more you tweak and develop processes to ease employee frustration and streamline operations, the better products, and services you can provide your customers. And, as every entrepreneur knows, happy customers often mean increased sales.
Make Sound Financial Decisions
Successful businesses must do more than make money; they must also be responsible for managing their finances. Haphazardly spending money causes debt and prevents you from investing in things your company needs.
Reviewing a sales forecast can help you make better financial decisions. Using the example above, if you needed to hire new sales reps, a forecast would help you determine the best time to hire. For example, if sales tend to decrease in the winter months, it may be best to hire in the summer when sales pick up again.
Boost Company Morale
When your employees are happy, everyone wins! Although there are various ways to boost workplace morale, sales forecasting is commonly overlooked. When employees or departments reach or exceed the quarterly target sales goal, recognizing them for their efforts can go a long way. It lets them know that you appreciate their hard work and motivates them to continue achieving success. Sales forecasting can also create a little friendly competition encouraging employees to reach greater heights.
Access To Capital
It’s not uncommon for businesses to need financial assistance to keep up with operational expenses, company investments, expansions, and more. Some of the most common places to turn are loan providers and investors. However, these financial resources don’t just give their money to anybody. Both lenders and investors want to know they’ll get their money’s worth.
Sales forecasting helps shed light on where your company is headed. It lets banks, lenders, and investors know how your organization can grow over the next few months to a year. An accurate forecast with efficient supporting data could be the difference between getting the capital you need or rejecting it.
On the other hand, public companies must present accurate sales forecasts to their existing investors so they can see how well their investments are doing.
There are many facets to managing company finances. While budgeting and sales tracking are an essential part of the process, you mustn’t overlook the importance of sales forecasting. It’s a necessary step that helps you to make informed decisions, improve productivity, reach goals, inspire employees, and access capital. If you haven’t done so already, invest in a sales forecasting tool to help you make the most accurate predictions for your company’s success.