Learn what forecasting software is, the different types of forecasting software, and how they can benefit your business.
What distinguishes businesses that perform well and scale from those that remain average or fail?
In fairness, it can be one of many things or even a combination of several. Such factors range from personnel, company culture, production quality, etc. However, one that has a significant impact and is often overlooked is decision-making.
In simple terms, good decisions yield outstanding results for corporations. Traditionally, business planning hinges on expertise, experience, and intuition. However, that's not the case anymore. Now you can capitalize on data-driven decision-making (DDDM) to enhance the quality of decisions. One of the best ways to achieve this is through forecasting software.
What is forecasting software?
Forecasting software refers to software solutions that analyze past and present data and trends to make predictions about the future. It helps businesses make informed decisions about goals and resource investment.
6 main types of forecasting software
The most critical data and metrics vary from one industry to the next. Also, even within one organization, various departments use varying data sets. As such, there are different types of forecasting software, including:
1. Sales forecasting software
Given the key role sales play in a company's success, sales forecasting software is a great tool to have. It uses the sales data generated by your sales teams to produce projections of the sales you can expect going forward.
A sales forecasting software will allow you to:
- Give sales teams more accurate sales targets
- Adjust production if need be
- Determine whether you are on course to hit financial targets
2. Demand forecasting software
Demand planning software (also known as demand forecasting software) allows you to optimize inventory levels. They achieve this by automating the process of predicting consumer demand. Some of the things demand planning software considers include:
- Consumer trends
- Demand changes with seasonality
- Buying behavior
3. Financial forecasting software
Financial forecasting software uses a wide range of financial data in your organization to give you clarity on the business's financial health. In so doing, it supports operational planning as it helps ensure that your financial resources are able to support business activities.
4. Cash flow forecasting software
Cash flow forecasting software gives you a representation of the amount of money you can expect to be paid in and out of your business over a given duration. Such a forecasting solution also gives you insight into future sales performance.
5. Revenue forecasting software
Revenue forecasting software uses historical data on revenues to create revenue projections for a specific period. This may be monthly, quarterly, or annually.
6. Budget forecasting software
A budget forecasting solution uses financial data from your books of accounts and other forecasts to plan future budgets in relation to expected earnings and expenditure.
Greatest forecasting software advantages for any business
While it may seem that financial planning software is suitable for large corporations, that's not the case. Even if you're a small business, you'll greatly benefit from forecasting tools.
However, as there are many, ranging from accounting software to sales planning solutions, ensure you choose the ones that will have the biggest impact on your company.
Along with better performance management, some of the benefits you'll get from such a planning solution include:
1. Creates accurate forecasts
The goal of the forecasting process is to give you insight into what to expect going forward. This may be in terms of sales, demand, cash flow, etc.
While it's possible to create forecasts manually, there are high chances that you'll make errors. If so, the business decisions you'll take based on that data will not yield desirable results. This is why forecast accuracy is vital.
By turning using forecasting software, you can be confident of getting accurate forecasts because it eliminates human error.
2. Automates business planning
A key benefit of using a planning platform is the automation it offers, more so in terms of business planning. Since all the insight necessary to make business decisions will be freely available, planning will be much easier.
3. Reduces the time spent on manual processes
Another benefit of automating forecasting is that employees will have more time to focus on core business functions. As a result, you'll enjoy greater productivity and profitability.
4. Facilitates decision-making
As mentioned earlier, data-driven decision-making is a key business enable. With management software, this is exactly what you get. It not only gives you accurate data but makes it accessible on time. In so doing, you have more time to do analysis, thus improving the quality of decisions.
5. Offers valuable insight into the future
Forecasting and planning processes greatly rely on present and historical data. By identifying patterns, trends, and behaviors of the past, it provides you with insight into the future. With this, you're better placed to prepare.
Best forecasting software that dominate their fields
When it comes to forecasting software solutions, you'll be spoiled for choice. Some of the best options available are:
When it comes to cash flow forecasting, one of the most reliable software solutions available is Float. This app is ideal for accountants and bookkeepers. It will give you a clear picture of your expected cash flow, enabling you to prepare adequately and avoid unnecessary hiccups.
Oracle is a top-of-the-line demand forecasting tool. It's designed to help retailers keep up with the needs of the modern retail ecosystem.
If you want to gain more control of your company, Jirav is an ideal tool. It is an all-in-one FP&A solution designed to drive business forward with comprehensive financial modeling.
Forecasting software FAQs
If you're new to forecasting software, it's understandable if you have some questions. So here are some of the most commonly asked ones and their answers.
1. What are the best forecasting tools?
Due to the importance of forecast accuracy, you need to choose a reliable software solution. Some of the reliable ones for different business needs include Oracle, Float, and Jirav.
2. What is the difference between forecasting software and BI tools?
Both business intelligence tools and forecasting software are essential for small businesses. While the BI tools focus on collecting data, forecasting software creates projections about the future based on that data.
3. What are the different types of forecasting methods?
There are four main forecasting methods. These are straight-line, moving average, simple linear regression, and multiple linear regression.