Getting your sales forecasts right can be difficult for small business owners as many are unsure where to start. However, preparing a sales forecast is an important part of your business plan and can help you keep on top of your cashflow. By focussing on the process, rather than the end figures, you can develop more accurate forecasts and keep better track of how your business is performing.
To make this an incredible year for your business, here are a couple of resolutions to shake up your sales forecasting process in 2016.
1. Keep records of previous years’ forecasts.
You can’t really say how you are going unless you have something to compare to. This is true not only for results, but forecasting as well. So on top of keeping track of how well you did, keep records of where you thought you would be.
Once you have a benchmark against which to judge your forecasts, ask questions. If this year’s forecasts are especially optimistic or glum, ask yourself why? What’s different this year? Is this completely unrealistic or do you have some basis for this forecast?
2. Keep updating your forecasts throughout the year.
No matter how prescient your forecasts may be, they are a product of the time they were made. As you progress through the year, and your targets creep up, outside events will influence actual performance.
Update your forecasts to take into account the new reality — have the economic conditions changed, is your customer base expanding or contracting, has a competitive product emerged, have you got new data to make new predictions? There are plenty of reasons why you should reassess and update accordingly.
3. Make your forecasts visible.
Forecasts are only useful if they are communicated, and your staff understand where they are and what they are working towards. Once your forecasts are set, communicate them to staff and make sure they can see them.
Put your targets up on the wall, a software dashboard, or someplace else where your team will see them all the time. Similarly, you should celebrate your wins in a visible way, to show you are making progress.
Your team is also a valuable resource when making and updating your predictions. From their place on the front line, they naturally have a different perspective than management. Setting aside time to go over forecasts with your team can be invaluable to a more accurate forecast.
4. Ensure your team owns the forecast.
When the entire team know the goal, make them own it collectively and incorporate incentives to reflect the fact that sales is a team effort. When everyone understands the forecast and understands the goals they are working towards, they are better able to work together as a team. This will improve engagement and result in better performance from your staff.
5. Utilise technology to improve the process.
Use spreadsheets to keep track of your forecasts and present the figures in chart form. If your business has regular customers, there are a number of free Customer Relationship Management (CRM) platforms that enable you to keep track of your customers and sales; some even integrate with other systems such as your accounting or marketing platforms, enabling you to not only keep track of past sales but also predict future sales based on past behaviour.
It can be easy for sales forecasts to veer off track if left unchecked, resulting in problems with cashflow and ultimately affecting the profitability of your business. By implementing processes into your forecasting strategy, instead of just guessing your sales targets, you can be assured your forecast is more accurate and achievable. Contact us if you need any assistance with forecasting cashflow or setting up KPIs.