Sales forecasting is immensely important, irrespective of the business you’re in. It helps organizations protect themselves by spotting and fixing issues in advance. It even helps them make informed decisions regarding budgeting, hiring, and goal setting. But, as important as it is, most businesses are far from accurate in these matters. Here’s where AI comes into the sales forecasting game.
What is Sales Forecasting
Sales Forecasting is the process of predicting the sales revenue of a Company for a given time frame. By analyzing past sales data and market trends it helps predict the future sales of a Company.
This is a very essential part of business planning and strategy development for all types of companies. Accurate sales forecasting can help setting better sales targets, setting the budgets, allocating resources, etc. Overall it helps businesses predict the future demand for their product.
Benefits of Sales Forecasting
The Aberdeen Group found out that companies with accuracy in sales forecasting had a 10% higher likelihood of growing their revenue year-over-year. They’re also 7% more likely to hit their quotas. Sales forecasting offers several benefits for businesses of all sizes and industries. Some of the key advantages include:
1. Enhances strategic planning
Sales forecasting helps businesses gain valuable insights about future sales or demand for their products. The information provided can help companies plan their resources, production, marketing strategies, etc to meet with the estimated sales volumes.
2. Effective resource allocation & budgeting
With accurate sales forecasting companies can set achievable and realistic sales targets, which helps them set an accurate budget. It also helps businesses allocate their resources effectively, like hiring and training the sales team, funds for marketing campaigns, etc.
3. Identifying Risks and Opportunities
By analyzing the past sales data, sales forecasting helps analyze potential risks and opportunities in the market. They can adjust their strategies accordingly.
4. Managing risks
Sales forecasting helps reduce and manage risks in the market, by forecasting the future market conditions or fluctuations in demand in the market.
5. Effective marketing strategies
Sales forecasts helps businesses in creating their marketing strategies effectively to target the right audience at the right time, increasing the likelihood of sales conversions and improving customer engagement.
6. Enhanced operational efficiency
An accurate sales forecast helps businesses to optimize their operations by aligning production schedules, streamlining distribution channels, and managing supply chains.
Why are sales forecasts inaccurate?
Great question. There are a number of reasons behind that. Here are a few of them.
Over optimistic sales representatives
Sometimes it feels like your sales representatives breathe optimism instead of oxygen. And that’s not essentially a bad thing. Being optimistic actually helps them perform better.
The only issue is that their sales forecasts tend to be way off.
Lack of clean data
If you don’t feed your databases with accurate and high-quality data, your forecasts are going to be far from accurate. According to a study conducted by Experian, 91% of businesses have data errors on their hands.
MECLABS’s Brian Carroll put it best,
Garbage data in, garbage results out
Human error is the leading cause of data inaccuracy. Automation would help spare your employees the efforts involved in data entry, save a lot of time, and reduce inaccuracies.
If members of your sales teams leave your company, revenues are going to dip. If they leave unexpectedly, your sales forecasts will once again be off the mark.
If your competitors make any major changes, it’s likely that your own sales will be impacted. If they drop their prices, you may have to reduce your own prices or risk losing business.
How can AI help in sales forecasting?
Businesses generate tremendous amounts of data on a daily basis. But, processing this data is really hard for humans. There's just too much historical data for humans to go through on their own.
As a result of this, we just ignore a lot of our data. Valuable data is discarded because it's too much to process. This means that we're making uninformed decisions. And that's causing inaccuracies.
AI can bolster your sales forecasting efforts by going through the data and providing your staff with insights, observations and suggestions improving the overall sales process.
Internally deployed chatbots can help your employees make better forecasts. These bots could help your employees gather data and information from your system with minimal effort.
Instead of spending their energy hunting through your systems, all they'll have to do is send a message and the bot will retrieve that information for them.
AI & chatbots can even help with lead scoring. The user information collected by chatbots can help in scoring the leads in a better fashion. Artificial Intelligence can help understand which leads are more likely to convert. This can help improve forecasts and help sales reps concentrate on the right prospects. Here's an insightful article on sales prospecting techniques.
Predictive analytics go through the information available, analyze patterns and make predictions based on these patterns. They incorporate AI, data mining, statistics and machine learning to create predictive models.
Entrepreneur Magazine reported that organizations using predictive analytics have been able to make forecasts that are up to 82% accurate.
What are the benefits of AI in sales forecasting?
Sales forecasting is a critical function in any organization, as it helps businesses plan and prepare for the future. However, traditional forecasting methods often rely on historical data, which may not be sufficient in today's fast-paced and ever-changing business landscape. This is where AI comes in, offering a range of benefits for sales forecasting that can help businesses stay ahead of the curve. Here are some of the key advantages of using AI in sales forecasting:
AI-powered forecasting models can analyze vast amounts of data and identify patterns that humans may miss, leading to more accurate predictions. This can help businesses make better decisions and avoid costly mistakes.
AI can process data at lightning-fast speeds, providing real-time insights into sales trends and performance. This can help businesses respond quickly to changes in the market and stay ahead of the competition.
With AI, sales teams can automate many routine tasks, such as data entry and report generation. This can free up valuable time and resources, allowing sales professionals to focus on more strategic activities.
AI can analyze customer data to provide personalized recommendations and insights, helping sales teams tailor their approach to individual customers and improve their overall performance.
By providing more accurate and timely insights, AI can help businesses reduce their risk exposure and make better decisions about resource allocation, inventory management, and other critical functions.
AI-powered forecasting models can scale to handle large volumes of data, making it easier for businesses to expand their operations and enter new markets.
Overall, the benefits of AI in sales forecasting are clear, offering businesses a powerful tool to stay ahead of the curve and succeed in today's competitive business landscape. By leveraging the power of AI, businesses can gain deeper insights into their sales performance, identify new opportunities for growth, and make better decisions about their future strategy.
Start making better predictions
AI and machine learning can be very valuable tools for increasing the accuracy of sales forecasts. The early adopters of these methods will certainly be able to make better predictions, leading to better decisions.
Get started with Engati's AI offerings and start improving your sales forecasting accuracy today.
Schedule your chatbot demo now!