Jun 9, 2022

How to Use AI to Improve Sales Forecasting Accuracy?

Let us take you on the journey to understand what sales forecasting is and how to use AI in sales forecasting methodologies.
Vivek Menon
Vivek Menon

What is Sales Forecasting? How it Helps to Predict Future Sales

Sales forecasting is a key business process for every company. It’s also one of the most important tasks for sales managers who use sales forecasts to plan inventory, operations, and strategy.

Forecasting helps companies plan for the future and adjust strategies to meet the needs of the market.

Forecasting is a form of predicting the future, and companies can use it to make more intelligent decisions about their operations. Forecasting helps companies plan for the future, allocate resources, save money, and get more sales.

To make accurate forecasts, analysts need to collect data from multiple sources. This data is then combined with information from historical records to create an accurate forecast model.

40% of salespeople struggle to get accurate forecasts – why?

If a business doesn't know how many units it'll sell, it won't know how many inventories to keep in stock or what to order from suppliers. This unawareness can lead to huge problems—for example, if there's a shortage of products, customers will be unhappy with you, and your company may lose future business opportunities.

Salespeople often rely on guesswork instead of concrete facts when making their predictions for future sales numbers.

1. The pipeline is an inaccurate representation of a forecast.

The pipeline is a subjective measure of future sales. It's impossible to say how much revenue will come from deals in the pipeline because you don't know how many deals will close. 

Also, sometimes deals slip through the cracks and don't appear on this list at all. This can happen when you're under pressure to hit a target number, and you forget to update your list.

2. The sales cycle isn’t predictable.

If you’re familiar with the sales cycle, you know that it isn’t predictable. The best salespeople can usually tell you how much time it will take them to close a deal, but they can’t tell you when each step in the process will happen.

Sales forecasts are made on best-case scenarios, and even conservative estimates are still probably overoptimistic.

3. People are subjective and not transparent about their pipeline.

People are subjective and not transparent about their pipeline. Sales reps may be motivated to close deals, so they may be overoptimistic in their forecasts. They might spend more time on deals they think have a better chance of closing. Or they might under- or over-forecast based on their own personal goals. 

Finally, they might be reluctant or unable to share sensitive information (such as bad news) with the rest of the team due to fear of repercussions from management or peers alike.

Sales forecasting also gives a company insight into the market it serves by providing information. It includes buyer behavior patterns (when they buy), what products they purchase together (bundling), etc. The most important benefit of sales forecasting is it helps you allocate resources. Forecasting allows you to anticipate the need for more staff, equipment, and office space. This can help you manage your business more effectively by allocating the appropriate amount of resources at the right time.

  • The forecast is only as accurate as your forecasting process and the data you input into it.
  • The forecast is only as good as the people who are doing the forecasting.
  • The forecast is only as good as the data you input into it.

Ways of Using AI to Enhance Sales Forecasting!

1. Chatbots

Your employees can improve their forecasting abilities with the help of a chatbot deployed within the company's system. The chatbot will gather data and information from the system with minimal effort, sparing your employees’ time spent hunting through the systems.

2. Predictive Analytics

Predictive analytics use AI, data mining, statistics, and machine learning to create predictive models. An Entrepreneur It is often noted that organizations using predictive analytics have been able to make forecasts that are up to 80% accurate.

3. Data Processing

Businesses generate tremendous amounts of data on a daily basis. However, humans aren't really good at processing it all themselves. As a result, businesses often ignore their data. Customer insights AI is a new and exciting technology forecasting the future sales of your business. It's sophisticated, smart, and capable of making meaningful predictions to increase sales and profits.

4. Lead Scoring

Artificial Intelligence and chatbots can help businesses score their sales leads in a more efficient manner. Chatbots can collect information from potential customers and analyze it to determine which leads are more likely to convert. This can help sales reps concentrate on the best prospects, improve forecasts and increase revenue for companies.

Benefits of Using AI in Sales Forecasting

1. Real-Time Sales Forecasting

Real-time sales forecasting is a good example of how AI can be used to enhance sales forecasting. As the demand for products and services fluctuates, real-time data deliver timely information, allowing companies to predict customer needs and behavior quickly. This ensures that products are available when customers want them, thereby improving both customer satisfaction and company performance.

2. Data-driven Decision Making

AI enables businesses to analyze large amounts of data and provide answers in real-time. This allows them to see patterns or trends that can otherwise be difficult for humans to detect. AI helps with both short-term and long-term planning by providing insights into what might happen in the future based on past actions, behaviors, and outcomes.

Need to Know More About AI-Powered Sales Forecasting?

AI-powered sales forecasting software uses machine learning technology to improve the accuracy of sales forecasts. The software can analyze historical data and predict future trends with greater accuracy and confidence than human beings, allowing you to make better business decisions.

For example, a company that sells products online may not be able to keep up with their demand if they don't have enough inventory available when a customer wants it. This could lead to unhappy customers who don’t get their products in time. They might post negative reviews on social media websites, thereby lowering the visibility of your business.

Machine learning technology allows for real-time updates to your forecast, so you always have the most up-to-date data at your fingertips. In a nutshell, this means that your machine learning models are trained on historical data and used for predictions in real-time. Additionally, machine learning systems can detect trends in new data and update forecasts in real-time as well!

Here are some benefits of using machine learning in your forecasting:

  • You can use machine learning to make forecasts with incomplete data.
  • You can use machine learning to test future scenarios.
  • You can use machine learning to improve the accuracy of your forecasts over time.
  • You can use machine learning to make forecasts across multiple time periods.

AI can help you forecast with greater accuracy and confidence.

You need to be confident in your forecasting ability. Our research shows that salespeople who lack confidence in their forecasts are less likely to hit their targets, and they’re also less likely to achieve them if they do hit them. 

In fact, salespeople who don’t trust their own forecasts are nearly twice as likely to miss their quota by 10% or more.

Unlike most other systems for forecasting and tracking outcomes, AI makes it easy for managers like you to see how accurate each forecast is—so you can understand which ones are right on target, which ones need tweaking and why, and which ones might be missing some key information altogether. That level of insight helps drive better business decisions overall.

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