For many, sales forecasts are the bane of their existence. They can be inaccurate, hard to understand, and require constant supervision – something like a teenager. In many cases, they’ve been manipulated to reflect the desires of the creator or recipient, rather than being left to reflect the pure data. I’m going to provide you with five simple tips to make them more manageable and useful.

1) Know Your Buyer

Too many lists are based on historical data without taking into account buyer behavior. However, think about it a minute – what makes the sales process happen? Buyer behavior. Where is the buyer in the buying cycle? How will they buy? Where in the decision-making process are they? With a clear understanding of what’s driving the buyer, you can create a more accurate forecast.

2) Understand the Sales Strategy

A good sales strategy takes into account the needed outcomes to achieve the business’s goals. That said, there is no one true set of numbers for sales strategy. You may have a number for each of the functional areas involved in achieving those goals: the sales team might have a number they need to achieve their goals, but product management will want a product-specific number, and finance will want revenue numbers. Why are these important? Because a more accurate forecast can be achieved if you understand the pipeline process and where in the lifecycle an account or product is. In the same vein, don’t fudge the numbers to target what you want to achieve. Be realistic. Remember, sales forecasts are not sales targets: the forecast should reflect what you can achieve, not what you want to achieve.

3) Continuous Improvement Is Key

Remember that a sales forecast is a picture of a moment in time. It doesn’t evolve or track anything that’s happened after you take the picture or when new information appears. Be prepared to manage the forecast. It will need updated or modified as additional information becomes evident. When managing the forecast, don’t ignore or eliminate the outliers. If the forecast line starts diverging from the actual numbers, it’s time to analyze and determine the cause.

4) Attain Buy-In

Sales forecasting should be a collaborative effort. Like anything else, if people aren’t involved in the development of the forecast, they won’t have faith in the numbers. They may “tweak” the forecast to fit their own agenda, or simply not believe it. Changes they make may result in a skewed forecast, or, if you don’t take care to include all the functional areas, you may wind up with skewed numbers.

5) Keep It Simple and Consistent

The forecast doesn’t have to be uber-complicated. Very often, the person managing the forecast is someone for whom it is a small part of his/her overarching responsibilities. Choose the right software, and it will be nimble and responsive, allowing for adjustment of dependent variables, sales team modifications or alignment of data with CRM. Once you’ve got the model designed, stay with it. Be consistent from month-to-month or year-to-year. This will make it easier to understand, review and audit.

Summary

Sales forecasting is critical to the planning process and maximizing business efficiencies. Accurate forecasts result in accurate inventory, staffing, operations and cash flow management, among others. The most successful companies consistently strive to achieve a more accurate forecast. An inaccurate forecast leaves the company operating in the dark. An accurate forecast can become a major tool in achieving a business’s goals and growing a more successful company.