Sales forecasting is an essential element of budgeting, meaning you need to get it right if you want your business to succeed. Making too many mistakes while forecasting future sales could result in your finances floundering or being unable to grow, neither of which are particularly desirable scenarios. Take a look at these common errors that you should be avoiding:
Although forecasting is always going to rely upon some guesswork, it’s important not to trust your intuition or emotions too much. No matter what feelings you get about the future of your business, you should always make forecasts based on the data you have. Make sure you’re using concrete and measurable information about how you’ve performed in the past to make better decisions for the future, unless you’re a brand-new startup. Always set yourself a realistic target based on your historical records, as being way off the mark will only result in you having to recalculate part way through the year. Relying on how you feel is just asking for under or overestimation of costs and profits.
Using old software
Investing in new, user-friendly systems can reduce the number of mistakes you make simply because they’re easier to navigate and take care of more of the process for you. Although Excel is a classic, new developments in technology such as Xero allow you to customise your books, offering simpler comparison options that you can back up easily and keep safe. If you’re still using paper to make your forecasts, you might need to rethink your strategy.
The most important players in the future of your business are arguably your customers. When forecasting profits, you need to make sure you’re staying in touch with the people who will be driving them. You can collect valuable data about your audience and their intentions to make forecasts about not only your profits but about the market. Understanding the market is what will enable you to anticipate how your business will fit in with the competition and whether you can expect any down periods.
Get in touch with us here at Propeller Advisory for more help with budgeting and forecasting.