As the economic downturn becomes more severe and a recession looms, inaccurate financial projections will put businesses at risk more than ever. A new survey conducted by Gong, a leading revenue intelligence platform, finds that 44% of UK businesses missed their earning targets at some point this year, with almost half (49%) confirming they missed their target in the first quarter of this year.
Accuracy among the backdrop of economic uncertainty is critical for business success, yet when compiling sales forecasts, 14% of business leaders say their quarterly sales forecasts are inaccurate. This creates a worrying outlook, potentially leading to serious consequences such as dampened trust among investors as well as disruption to operations and workforce.
Missing revenue targets because of inaccurate predictions might reflect a wider lack of trust among businesses towards financial forecasts. Indeed, making a financial prediction can not only be seen as daunting but also time-consuming and tedious given that over half (52%) of business leaders feel they spend too much time on forecasting. Furthermore, a whopping 92% of respondents feel like they’re spending enough or too much time on their forecasts.
Although most agree that forecasting takes up too much time, many business leaders still use outdated and inefficient tools such as spreadsheets to build the picture of their business health and pipeline. In fact, more than two thirds (68%) of companies admit they build their forecasts in Excel.
Wendy Harris, Head of EMEA at Gong, said: “Accurate forecasting is difficult during healthy economic times, and it’s even more challenging when there’s a downturn and uncertainty. Whether it’s over or underestimating the revenue, the implications are serious. It can lead to cost-cutting in other departments, lay-offs and missed opportunities to accelerate growth. Having a clear vision of the financial future – delivered by accurate, reality-based data gathered from interactions with prospects directly – is vital for business leaders to weather the upcoming uncertain year.”
Estimating revenue empowers business leaders not only to efficiently allocate resources and plan for development but also mitigate the risks of external factors, such as supply chain disruption, political and social turmoil and economic uncertainty. Data from Gong’s The Reality of Sales Forecasting shows that while 63% of sales executives believe that sales forecasting was essential to the success of their company, 53% said that making an accurate estimate was more important now because the economy is uncertain.
The study also discovered a link between the proportion of responders using real-time conversational data and better forecast accuracy. In fact, businesses are twice as likely to claim that their estimates are accurate to within 5% of the actual value when they use conversational data to assist with their forecasting.