Businesses rely on growing sales. Sales forecasts give companies a basis for planning their future operations, making budget decisions and generally managing cash flow. Still, forecasting can be quite tricky. Even with today’s computer systems, sales forecasting is not an exact science.

The dreaded task of forecasting is not well liked among employees. This comes as no surprise since forecasting puts businesses under a lot of pressure. Regardless of how many gigabytes of quality data you have, your predictions might still be completely wrong.

Improve the accuracy of your forecasts by learning to identify and avoid 7 common forecasting mistakes many businesses make.

1. Concentrating on sales figures

Industries and customer expectations can change rapidly, so past data doesn’t guarantee future results. Instead of mathematical projections based on sales history, a better approach might be forecasting based on identifying current consumer purchasing patterns. In other words, you might be better off forecasting demands instead of sales.

Never assume that offering discounts or other incentives will lead to an uptick in sales just because it’s worked in the past. Focus should be on real customer activity, not your various sales campaigns of the past.

2. Trusting your instincts

As an experienced sales person, your gut instincts may serve you well when dealing with clients, but don’t necessarily translate into forecasting. Recent, structured, and reliable data should be the only resource you use to gain insights.

Your sales forecasts are unlikely to be completely accurate all the time, but data-driven results are still better than emotional reactions that are little more than rough guesses.

3. Not aligning key sales metrics

Unless your team knows exactly which metrics are to be measured, chances are you will end up with a series of different predictions. This is why each analyst on the team needs to understand just what KPIs (key performance indicators) are being measured and where they are coming from.

Analysts that employ data sets or forecasting goals that differ from each other or from management expectations are wasting time and creating confusion.

3. Dependence on a single tool or solution

Whether you are using a single Excel spreadsheet or a sophisticated business intelligence system, you need full understanding of how to properly utilize your tools and their features.

In addition, forecasting should involve more than feeding in data and crunching numbers. It should take into account your company brand, innovations on the market, as well as financing or product changes your business is experiencing or planning.

4. Not updating your forecasts

Industry markets change too quickly for past forecasts to be meaningful. Even monthly forecasts are 30 days out of date with real events. Many things could have changed – new products, mergers, price hikes, and other factors.

Every change should be reflected to provide accurate forecasting. Use tools such as customer relationship management (CRM) software to track changes. Your information should be as up-to-date as it can possibly be.

Don’t plan your forecasts around your own schedule. Waiting for a new product launch or a sales report to do some real-time analysis may mean you are weeks or months out of touch with what is really going on. It is important that you make plans based on what customers are doing now.

5. Ignoring business and sales stages 

Both business deals and sales go through several important stages. Sales teams and analysts need to be fully aware of what these stages are and how they affect results.

Rather than a simple matter of focusing on closed vs abandoned deals, analysts need to assess when and why a deal or a sale is abandoned.

Learning the factors and behaviors behind these events helps to anticipate real-life situations that are in continuous transition from one stage to the next.

6. Mistaking predictions for reality

Regardless of how advanced your forecasting software is, or what kind of experience your team has, sales forecasts should never be seen as hard facts.

No expert can predict changing markets with certainty. However, this should not deter you from using forecasting as a tool to evaluate results and suggest new business strategies.

In conclusion, getting the most from your sales forecasts requires that you avoid mistakes such as using outdated information or relying on your instincts. Don’t mistake forecasts for reality, and make sure that everyone knows what metrics to measure.

In sales forecasting and business in general, you should always keep focus on identifying real customer trends, rather than relying on formulaic interpretations of past sales history.

Heather Redding is a part time assisstent manager and freelance writer based in Aurora, Illinois. She is a coffee-addict who enjoys reading. Street photography is her artistic outlet and she likes to capture everyday little moments with her camera. You can reach Heather via Twitter.