Sales forecasting is the process of predicting sales revenue monthly, quarterly and annually. These forecasts help sales managers to alter sales strategy and tactics to hit revenue targets.
Suppose, your forecast predicts your sales team will hit quota and there are opportunities to grow further. This would mean hiring additional resources to keep up with the demand. Another way round, if the forecasts predict your team will miss quota, you can change your strategies to focus on certain opportunities and maybe let go of a few salespeople. Thus they also used for other business decisions like budgeting, hiring, resource management, etc.
Sales forecasting is most helpful for companies with an established product and consistent revenue line. This software doesn’t yield best results for new products or products whose pricing is still flexible. Another requirement for this to work is an established sales process.
Sales forecasts are sensitive to competition, market, government regulations, company policy, seasonality, employee count, etc. Sales forecasts are directional and usually try to be as accurate as possible. Even with a small range of error, they can be immensely useful in motivating the team to push harder to hit quota.
What is Sales Forecasting software
Sales forecasting software uses sales activity data and historical data to predict sales revenues for a given time period.
Forecasting software aims to bring some robustness and standardization to your sales forecasting process by making it more scientific and rigorous. The backbone of this software thus becomes the data that goes into it. Hence have high-quality sales activity data and updated CRM become critical. So this software has capabilities to auto-capture sales activities from email, call, SMS, etc and updates your CRM.
This software then uses this latest and accurate data from the CRM, combine them with historical trends and analytics, to compute deal risks and conversion probabilities. Armed with conversion ratios, current and future pipeline estimations this software can make reasonably sound bottom-up sales forecasts. Some software uses predictive analytics, AI and ML to do all the heavy lifting around identifying historical trends and conversion ratios.
They also have strong data visualization (for KPIs and metrics) and reporting capabilities (eg win-rate reports, cycle time reports, activity by rep reports).
Who uses Sales Forecasting software
Sales Operations / Managers
The sales forecast is one of main responsibilities of the sales operations team. Forecasting software saves the sales rep and sales operations team time by automating data capture and data update into the CRM and gives them flexible modelling options to come up with the most accurate forecast.
The marketing team can use the deal risk profiling in the software to adjust their ABM strategy and also understand their contribution to sales revenue.
The biggest benefit the sales forecasting software gives the finance and accounting teams the information they need on revenues metrics which helps them improve their resource planning.