The 1-2-3 Guide to Financial Forecasting

Did you know: more than 80% of sales organizations do not have forecast accuracy greater than 75%? Despite the advanced tools and technologies available to help companies enhance their financial forecasting strategies, many still live in a world of in-between, where forecasts may or may not be accurate for a given period.

It doesn’t have to be this way. If you feel like your organization lands in the category of having inaccurate financial forecasts, you’ve come to the right place. There are best practices, tools and systems, and modern approaches you can take to seriously improve your financial forecasting accuracy right away. We’re going to cover them in the sections that follow.

Let’s get started!

Quick Takeaways

• Financial forecasting enables company leadership to predict future revenue and strategize accordingly.
• Intelligent revenue tools enhance financial forecasting capabilities by centralizing data, streamlining processes, and eliminating manual tasks.
• A defined sales cycle and clean pipeline data are essential to financial forecast accuracy.
• Companies must commit to maintaining a flexible strategy that accounts for changing market conditions.
• Improving your overarching forecasting strategy gives you more time to coach individual sales reps and address smaller issues that may impact growth over time.

What is financial forecasting?

Financial forecasting is the process of estimating your company’s future financial outlook. Most organizations do it on a quarterly and annual basis. Its core purpose is to help leadership predict future revenues and plan resources and growth strategies accordingly.

Many sales reps, managers, and executive leaders see financial forecasting as a daunting task. It requires gathering and analyzing a large volume of data, and the pressure to build accurate forecasts is high. But forecasting does not have to be a stressful experience. With the right tools, strategies, and approaches, you can integrate forecasting into your everyday operations to create an accurate, insightful vision of your company’s financial future.

The benefits of accurate forecasting are manifold. When your financial forecasts are on point, your sales team and company leadership can count on predictable revenue streams. They can allocate resources effectively, feel confident in their ability to hit sales targets, and make more informed, data-driven decisions.

The result? An agile, intelligent organization equipped to succeed in changing market conditions and grow in the long-term.

Why upgrade your financial forecasting methods?

Like most other facets of business, technology has transformed financial forecasting. Companies can now leverage software systems (most of them powered by AI) and other tools to harness new forecasting capabilities and drastically increase the scale and accuracy at which they’re able to predict future revenue.

The thing is, many companies haven’t gotten on board.

Why? Well, most obviously because it requires change — and significant change at that. Sales teams accustomed to manual forecasting methods or any other version of “the way we’ve always done it” are often hesitant to adopt new tools. The tools themselves require a financial investment that company leaders may hesitate to make.

But there is no doubt about it: keeping your financial forecasting methods stagnant is a missed opportunity. While change can be challenging when it’s happening, the long-term benefits of a streamlined, modern, intelligent forecasting strategy are well worth the investment it requires.

Intelligent forecasting technology eliminates the tedious and time-consuming manual processes previously required to forecast. It creates a central source of truth for your sales team, improves pipeline visibility, and supports intuition with data-driven insights.

In short: an intelligent forecasting strategy transforms financial forecasting from a stressful quarterly process to a streamlined part of the way you do business and drive company growth every day.

5 Steps to Implementing Accurate Financial Forecasting

Define (and Enforce) Your Sales Cycle

Defining your sales cycle — and enforcing it in practice — creates consistency across sales teams and reps. It allows you to build more accurate forecasts knowing that every lead is moving through the pipeline the same way, based on the same criteria. Without a defined sales cycle, for example, you may have two sales teams qualifying leads differently, leaving you unable to predict which are truly likely to convert.

Defining your unique sales cycle means clearly outlining which sales rep actions align with each stage. It means specifying when to advance or regress leads, and when to close them as a loss. It means creating clarity about where deals belong in the pipeline based on clear and consistent criteria.

A defined sales cycle creates better guidelines for your sales reps and more dependable data on which you can base your financial forecasts.

Prioritize Pipeline Hygiene

Your financial forecasting tools are only as effective as the data you enter into them. Pipeline hygiene is the process of ensuring that data in your systems is accurate and updated at all times. For your sales teams, this means being accountable for correct input and regularly removing deals that no longer belong in the pipeline. When your data is clean, your financial forecasts are more on-target and your revenue more predictable.

Be Flexible

We’ve all heard the phrase “expect the unexpected” and it rings true for sales organizations in every industry. The truth is that markets have changed more frequently and unexpectedly over the past few years than any other time in recent history.

Your financial forecasting strategy must have built-in flexibility so that you can adjust to changing economic conditions. In other words: don’t create a 12-month forecast, put it to the side, and look at it again in 12 months.

Financial forecasts should be reviewed regularly, and sales leaders must take into account both internal and external factors that may be impacting them. Adjust your forecasts accordingly so that your sales teams don’t live with unrealistic targets. Resist the urge to focus on the negative and instead look for opportunities that may present themselves amidst change.

Drill Down Into Individual Performance

If you’ve mastered the first three steps, you now have a defined sales cycle, healthy pipeline data, and flexible financial forecasting strategy. You are confident in the insights you’re using to make your forecasts, and your internal processes are executed like a well-oiled machine.

What now? Now, it’s time to drill down even further.

One of the most important advantages of an effective financial forecasting strategy is that it gives you the ability to optimize at both an overarching and granular level. You can take time to assess individual sales reps’ performance, understand bottlenecks and other challenges, and take steps to improve all of the above.

Use the time and insight you have gained from your new financial forecasting strategy to spot and address unique opportunities and challenges you see on your team and within your strategy. Over time, the ability to drill down has a cumulative effect, making your sales forecasts more accurate, predictable, and positive.

Over to You

Ready to upgrade your financial forecasting capabilities? Xactly Forecasting® is a flexible sales forecasting software that delivers detailed insights and aligns with your organization's sales processes. It delivers data-informed pipeline analytics to drive consistent sales execution and accurate forecasting for accelerating predictable revenue.

Learn more or request a demo today!