While preparing budgets and forecasts, finance and accounting leaders carefully analyze various factors, including historical data, inflation, interest-rate projections, and regulatory changes. This process also involves collaborating with stakeholders to integrate insights related to the organization's goals and resources.
An accurate sales forecast is crucial for managing staffing, production schedules, and capital expenditures, contributing to strategic agility, financial health, and customer satisfaction.
Here are three tips to help minimize sales forecasting errors and build a successful, sustainable business:
- Track and manage the metric- To calculate the accuracy of your sales forecast, use the formula: actual sales - forecast sales) / actual sales. Ensure the forecast and actual sales correspond to the same period. According to APQC data, top-performing organizations report a 1.3% error rate in sales forecasts, with the median at 1.8% and lower-tier organizations at 2.4%.
- Build an accurate sales forecast- To build an accurate sales forecast, integrated data and input from various stakeholders are essential. Key inputs include historical sales data and trends, while finance leaders should also consider external factors like the economic outlook at both local and international levels.
- Take active steps to improve forecasting accuracy- Organizations should focus on strategic and financial planning to improve sales forecast accuracy. This involves analyzing market trends, customer behaviors, and competitor activities. Accurate forecasts enhance financial health, resource allocation, and risk management while aligning projections with financial goals to anticipate market changes and seize opportunities for long-term growth.
Learn more about these tips and explore the average percentage error for the total sales forecast in APQC’s Overall Sales Forecast Accuracy.