Sales Forecasting Software
Sales Forecasting Software Overview
What is Sales Forecasting?
Sales forecasting is the process of predicting sales results (and revenue) for the coming months, quarters, and years. Forecast reports typically show sales target vs. achieved sales vs. potential sales. Sales forecasts and forecast analysis aims to answer the questions:
1. For a given time period, salesperson, territory, or account, what amount of revenue can we expect?
2. How did actual sales compare to expected sales, and if those two numbers don’t match, why not?
3. Based on past forecasts and current conditions, what method should we use to produce the most accurate forecast?
Good forecasting requires an understanding of selling conditions as well as buying conditions; forecasting is a process of self-assesment, market assessment, and self-reflection. Accurate sales forecasts require detailed records of company finances and business processes as well as external market conditions. Forecasting establishes a common source of truth, important for enterprise scaling and planning.
Technology for Creating Sales Forecasts
Basic sales forecasting software evaluates historical business data and then projects sales trends into the future, producing a report of expected sales. Typically sales forecast reports estimate sales on a monthly basis for the next year. Although some programs allow users to create long-term sales projections, because of the changing market and evolving sales processes these are much less accurate than short-term projections. Since forecasts are essentially snapshots (of the possible future), they need to be updated as time goes on and new data is available.
More advanced tools for forecasting sales will provide features like collaboration, custom forecasts, and additional analytics around trends, operational inefficiencies, and forecast inaccuracies—facilitating a more flexible, agile forecasting process.
Alternately, sales forecasts may be created using spreadsheets or a general BI tool. However, the benefits of using a dedicated sales forecasting solution include a user interface with sales forecast templates that can be programmed by Sales (rather than IT or data scientists), visuals that are relevant and comprehensible to sales managers, a better contextual understanding of what the forecasts mean, and deep integration to other Sales technology systems. Some sales forecasting software is not standalone; instead it works with a program like Excel to generate reports.
Sales Forecasting Methods & Models
There are two approaches to sales forecasting: qualitative, or informal forecasting, and quantitative, or formal forecasting. Most companies utilize a combination of both methods.
Companies use qualitative forecast methods if they are innovating in a new and developing market, or when they are trying to expand into an unfamiliar field. These are both situations where historical data about buyer behavior, sales processes, and revenue—usually the basis for sales projections—are unavailable. Qualitative methods include surveys of experts in the field, asking for opinions from the sales force, and/or asking customers about their interests and future buying intentions. Qualitative sales forecasts are by nature more intuitive, nebulous and uncertain than forecasts based on historical sales data. Often they are used as an initial guideline for expectations, rather than as a firm projection of expected sales/revenue.
Quantitative forecasts use historical data with statistical models to identify sales trends and predict future sales numbers. The models are based on factors like past sales volume, gross national product, market conditions (disposable income, total number of potential buyers), etc. The formula for predicting future sales and the accuracy of those predictions depends on whether demand for the product and sales efforts are stable and predictable. Actual and projected sales are often different because of changes in economic and political conditions, workforce turnover, and technology trends. The math behind sales forecasting (depending on the approach of the sales manager or software tool) may include correlation analysis, market factor indexing, the chain ratio method, the total market demand technique, the market build-up approach, and/or time series projections.
Sales forecasting software includes sales forecast templates, also called sales projection templates. These templates are set up to run statistical analyses on imported data and produce pre-designed sales forecast reports. Typically, users program the templates with “assumptions” to simulate sales behavior and market conditions within the model. Depending on the product, this may be more or less technical. Products that are designed for sales managers tend to be more user-friendly than BI forecasting tools.
Sales Revenue Forecasts: Demand Planning vs. Sales Management and Operations
Sales revenue forecasts have two primary use cases:
1. Projected sales are a proxy for demand, which informs product inventory & resource planning. This is an ERP-focused use case, with the goal of improving production scheduling, inventory management, workforce logistics, and financial planning.
2. Sales forecasts are used to monitor expectations vs. actual sales performance for the benefit of individual reps, sales managers, and executive leadership. This is relevant to corporate planning as well as sales performance management (goal-setting, territory and quota adjustments, compensation plans, etc.).
When sales forecasting software is designed around (or marketed for) demand planning, it may also be called budgeting and forecasting software, or sales demand forecasting tools. Sales forecasting software designed around (or marketed for) sales performance management may also be called sales planning software, sales tracking software, or revenue forecasting tools.
Interdepartmental Adoption & Collaboration
The sales forecasting process, especially at large companies, often includes members from different teams and departments, such as sales ops, production/manufacturing, inventory management, finance, marketing, and executive leadership. These roles have vastly different perspectives on sales and plan to utilize the forecasts differently. Thus, some users advise that sales forecasting is most successful with interdepartmental collaboration. Some tools include forecast review, commenting, adjustments and overrides, or other collaboration features that allow multiple teams and roles to access forecasts and contribute their own knowledge in order to make reports as accurate, realistic, and helpful as possible. Enterprise-grade sales forecasting software should allow organizations to effectively communicate about forecasts and manage the forecasting process.
Sales forecasting software is often the primary mechanism for sales reporting. Robust products allow drill-down forecasts and reporting by inventory requirements (demand), number of salespeople and territories, total sales, sales success by account, as well as other dimensions. This is helpful for enterprises that may want to create multiple forecasts for the multiple roles/needs of users across different departments. Software intended to be the core sales reporting mechanism should allow users to break out the numbers or view them comprehensively (for example, so that senior management can understand the state of sales/revenue).
When evaluating sales forecasting products, buyers should consider whether they need static forecasts or more dynamic, “live” forecasts that continually test how well certain assumptions predict sales accurately (model fit). The software should document the models used to produce each forecast and provide visibility into the underlying assumptions of the forecast. While sales forecasting templates intend to simplify the math and data analysis, they should not be a black box; the mechanisms and logic of the equation should be available for review and adjustment.
Reporting in sales forecasting software is similar to reporting in other sales performance management applications like sales incentive compensation management, sales gamification, and sales pipeline management. Sales forecasting may be delivered as a reporting capability of an SPM suite, or via a robust CRM solution like Salesforce or Zoho CRM.
Most sales forecasts are inexact, and projected sales numbers are rarely 100% accurate. It is important to understand trends in the inaccuracy of the sales forecasts themselves. Not only will this help managers improve the forecasts (to produce more realistic, reliable predictions in the future), it will also provide insight into what type of operational inefficiencies might arise because of inaccurate forecasts. Depending on the type of mistakes made by a model (whether under-estimation or over-estimation of sales), the effects of planning to the forecast are predictable (wasted overhead because of over-investment in products and resources vs. delivery limitations, customer service failures, and lost revenue potential). The most robust sales forecasting tools will perform meta-analysis on the type of errors made in forecasts, and improve model fit accordingly.
Sales Forecasting Software Features & Capabilities
The following are common features of sales forecasting tools. However, functionality between products will differ depending on the complexity of the product and whether it is a point solution or application within a broader Sales solution.
- Sales forecast benchmarking: Allows users to forecast sales for their team/organization and compare to overall company or industry benchmarks.
- Quick forecasts / Dashboard: Dashboards and other automatic summary reports provide a quick overview of sales forecasts.
- Sales forecast visuals: Graphics on sales forecasts are clear, helpful and visually pleasing.
- Sales forecast templates: Includes pre-built templates for creating forecast reports relevant to Sales.
- Sales forecasting factors: Uses multivariate forecasting algorithms, where users can view and adjust the factors (variables) that influence sales projections.
- Sales forecast review: Tracks forecast accuracy/model fit and confidence.
- Sales forecasting management: Allows users to manage models and assumptions based on forecast reviews for a flexible, agile forecasting process.
- Custom sales forecast models: Users can create custom forecast models with granular control over the forecasting approach.
- Record of previous sales forecasts: Keeps a record of previous forecasts/audit trail.
- Sales forecast collaboration: Users can collaborate on sales forecasts. May include the ability for users on different teams to access forecasts, comment on forecasts, make adjustments, etc.
- Sales forecast data import: Historical data for forecasts can be easily imported from CRM systems and other sales software.
- Sales forecast export to Excel: Users can export sales forecasts to Excel.
Sales Forecasting Products
Salesforce is a web-based CRM application that enables users to forecast revenues and track leads. It is a leading sales, service, and marketing app. Salesforce.com's Sales (CRM), Service, Platform and Marketing applications are designed to help companies connect with customers, partners, and...
Zoho CRM is a simple, very low-cost CRM option for the smaller end of the SMB segment. The product has several useful integrations with other products, including QuickBooks, and Google Apps and Google Docs. The product also has an integrated project management module.
InsightSquared is a sales analytics platform that provides sales leaders with the insights they need to drive performance and close deals. According to the vendor, the comprehensive set of reports provide sales leaders with ready access to all the analysis they need to assess their progress,...
Pipedrive is a customer relationship management (CRM) software built to help small teams to drive sales.
NetSuite CRM is built on the same code base as the NetSuite ERP product and is usually used by customers who are already using NetSuite for ERP/Accounting.
Oracle Sales Cloud is a sales automation software accessible through Microsoft Outlook, iOS, and Android, along with territory and quota management and social collaboration.
IBM Cognos Incentive Compensation Management (formerly Varicent) is a highly flexible and scalable sales ICM product. It is designed to increase operational efficiency, accuracy, and audiability by automating incentive calculations and providing online compensation statements and reporting for...
C9 Predictive Sales products are now supported by InsideSales.com since the May, 2015 acquisition.
Datahug is a sales optimization solution that enables sales teams to increase sales velocity and reduce pipeline risk. The vendor says their solution gives sales managers deep visibility into the sales pipeline while reducing the burden on salespeople to update a CRM. The vendor’s value...
Nutshell offers a CRM with contact management, calendar sync, click-to-call, and collaboration features.
Avero Slingshot is an analytics platform specifically for sales forecasting and workforce optimization dedicated primarily to restaurants and hospitality, from Avero in New York.
Aviso Insights provides predictive analytics software that is designed to help sales organizations optimize their performance and exceed their revenue goals.
SalesDirector.ai is a sales forecasting and coaching tool that uses artificial intelligence to make predictions and recommendations based on combined CRM, Email, Calendaring and call log data.
TopOpps is a sales pipeline management and sales forcecasting solution. This solution provides pipeline visibility and a unified workflow for both inside and outside sales teams. The forecast tool is designed to give users an accurate representation of the sales pipeline in real time.
Fliptop is a predictive analytics application that combines public web data with internal CRM and marketing data to score leads, identify target companies and trigger marketing actions. Fliptop was acquired by LinkedIn in 2015, and the offerings will be integrated with LinkedIn products.
According to the vendor, MoData is an AI-powered sales intelligence software that delivers: Hundreds of out-of-the-box Sales KPI charts/reports. Sales Forecasting Deal Scoring Pipeline Prediction Rep Quota TrackingTrack pipeline changes & Funnel progression. Account Based Sales &...
Azurepath is designed to automate lead management and performance tracking for insightful business growth. According to the vendor, Azurepath is remarkably easy to use and suitable for any sized business selling any kind of product or service. Visual lead queues for individuals and teams eliminate...
ForecastPRO is a sales forecasting and analytics software solution offered by Business Forecast Systems, Inc.
IBM Omni-Channel Pricing Solution is a software product developed by DemandTec (acquired by IBM in December 2011) for sales forecasting and deal / sale / promotion optimization.
Vanguard Sales Forecasting is a sales forecasting and analytics software solution offered by Vanguard Software Corporation.
Right90 is a sales forecasting and analytics software solution offered by Right90.
Axtria SalesIQ is a cloud-based platform that helps sales management run an effective and efficient sales operation. The solution includes modules for planning, deployment and performance management.
Base Sales Forecasting is a sales forecasting and analytics software solution offered by Base.
Demand Works Forecasting is a sales forecasting and analytics software solution offered by Demand Works Co.
IBM Cognos Planning is a sales forecasting and analytics software solution offered by IBM.