Revenue analysis and forecasting are essential business tools for predicting future business results to position companies to cope with future uncertainty strategically.
Revenue forecasting tools like Performance Canvas can help business leaders make informed decisions on key performance metrics, including total revenue, using historical performance data, industry trends, and other information available to them.
In a sense, revenue forecasting aims to provide companies with a clearer understanding of how they will perform in the future, allowing them to make the necessary changes to improve their current performance and predict future results to plan ahead.
Here are a few tips to improve the quality of your business’s revenue analysis and forecasting.
Maintain up-to-date records
Since forecasting is dependent on accurate data, the first step in any forecasting strategy should be to commit to keeping correct records. While the amount of data available can make this sound overwhelming, your financial data should always be updated.
If you have access to your historical data from previous years, this can give you crucial information that can help shape your plans. If you haven’t started tracking your historical financial performance already, now is the time to start.
Use historical data
When predicting demand, the best tool you have is historical data because the past can be a strong predictor of the future. While it’s not a 100% guarantee, if you see such patterns, such as an uptick in sales or revenue at certain months, it’s typically a good idea to predict similar spikes in demand. Similarly, you might find patterns linked to bad weather, economic recessions, and so on.
Consult the Books for Details
Keep in mind that the only data you have that can be trusted when making a forecast is already in the books. Website traffic for your business and expected promotions are also two other factors to consider.
You can begin to look more closely at what your predictions mean for your company now that you have some estimates in place and work with your marketing and sales teams to make the necessary strategic changes. If your forecast indicates a lack of interest from a particular market segment, for example, you could focus more of your marketing efforts on them. Similarly, you could tailor promotions to the types of customers that are most likely to engage.
Taking Actuals and Budgets into Account
Budgets are crucial at any stage, from the cost centers or business units to each organization, and finally to the unified group level. There are several studies that can be used to equate actuals to budgets in a variety of situations.
Keep An Eye on Market Dynamics
It’s also crucial to observe broader market trends. These may be industry-wide developments, such as an increase or decrease in customers based on economic and market trends for a specific area or an increase in competitors. At the same time, there could be broader market patterns, such as economic downturns or upturns, that affect your forecast.
Use A Reliable Revenue & Forecasting Tool Like Performance Canvas
Finally, once you’ve developed your data collection methods, gathered your current data, and generated your various forecasts, you can review them regularly and use them to guide important business decisions. While no prediction can be 100 percent accurate, it can aid in creating an image of the future, which is helpful for revenue management, day-to-day budgeting, marketing, and sales, among other things.
Using an integrated FP&A tool like Performance Canvas Financials (PCF) can quickly help companies complete their revenue analysis and forecasts.
PCF provides teams with financial planning, forecasting, reporting, and consolidation on a single web platform. If planning for the future and creating reliable revenue forecasts is high on your priority list, PCF can help tailor the right solution. A solution that gives you better revenue forecasting and analysis, and one that can easily complement your existing ERP system.
Visit www.performancecanvas.com for more information.
