Sales forecasting software vs. an excel sheet – which one wins?
In this e-commerce-driven world, there is no way out without forecasting sales. It’s always a hot topic in the financial world. It plays a significant role in investor relations and inventory management, setting marketing and expense budgets and more. All e-commerce sellers thrive for accurate forecasts, but getting to that point has never been easy.
The majority of online sellers, retailers and even traditional brick and mortar stores have used and continue on using Microsoft Excel for inventory forecasting and management solutions. The reason is that the complex and repetitive data analysis is made easier with the implementation of Excel’s inbuilt forecasting and regression tool.
However, nothing is perfect in this continuously changing e-world, thus it’s quite natural that even Excel cannot fully meet the forecasting and data analysis requirements of its users. According to CSO Insights, companies that use spreadsheets close only 46% of their forecasting deals causing the frustration of CEOs and CFOs. It’s obvious that regularly missed forecasts will definitely lead to such major problems as:
- Employees lose confidence in your company
- People lose jobs
- Investors lose money
Thus, Excel lacks serious fundamentals that cause inaccurate forecasting.
Ultimately, companies fail which isn’t the desired result, for sure.
This brought to the point when most of the online retailers switched to sales forecasting software since it has many advanced features, unlike excel spreadsheets. Now, let’s see what is the majesty of forecasting software that leaves Excel in shadow.
Microsoft Excel Pros and Cons
Microsoft Excel advantages
- Building great charts
Microsoft Excel allows sellers to create easy-to-understand graphs and charts that are visually effective. When entering the required data inventory excel allows you to run any formula to get the necessary information.
- Conditional formatting
Watching numbers that all are of the same size and color may be frustrating. Excel allows using various color shades, text boldness options and more to make the numbers visually compelling.
Many spreadsheet users highlight that Excel is flexible in terms of writing formulas, formatting worksheets and building any required schedules for forecasts. They say that due to the usage of excel spreadsheet they are able to custom build exactly what they want relevant to the needs of their clients.
- Data collection with Excel
Microsoft Excel requires a lot of manual work for data collection. The inventory manager has numerous tasks to complete:
- Identify the objective
- Identify the purpose
- Establish timeline
- Run a forecasting model
Gathering data via inventory excel is more complicated when it’s time for seasonal forecasts. It requires separate data for each month, which makes the whole process more complicated.
Overall, excel has great tools like Anova, Moving Average, Exponential Smoothing, etc. and functions such as Linest, Trend, Forecast, Correl for sales forecasting, it’s just a matter of time to understand them and apply properly. On the other hand, considering the fact of human interference and manual fulfillment of certain data, the risk of making errors is higher.
Below we have singled out several inconveniences that excel causes for its users and they aren’t minor ones.
Microsoft Excel disadvantages
- It’s time-consuming
The number one problem sellers have pointed out during the usage of Excel as their forecasting solution and inventory management method is the wasted time. It takes a lot of time for the inventory manager to locate reports from data sources, export them, organize all that data in an inventory spreadsheet and with all that buzz around provide accurate calculations and analysis without costly errors.
The same statistics by Vortini have revealed that in some cases forecasting may even take a day to complete per sales professional. When calculated it becomes evident that 20% of each employees’ working week is spent on a non-profit activity. The conclusion is obvious here, the seller has to sacrifice either the accuracy of the forecasting data or meeting deadlines on critical inventory spreadsheet decisions.
- Complex reports
Generally, Excel-based reports are long and complex even for the most sophisticated Excel expert. You cannot deny that constantly scrolling up and down, left and right, hiding and unhiding columns to find relevant cells is more than confusing.
The fact is that the inventory spreadsheet files in Excel consist of numerous parts and the information is too much to handle or organize on one sheet. Thus, it’s logical that the sales forecasting methods and process are error-prone and the results are often unsatisfactory.
Creating a reliable process on an Excel sheet requires plenty of time and that is where Excel becomes ineffective.
- Data modification
Besides being time-consuming and complex, Excel sheets are prone to major errors when changing even one cell in the sheet.
So, reading and understanding massive information in Excel isn’t enough, you should be extra accurate when modifying anything in the sheet to avoid error messages popping up everywhere.
Therefore, many companies have freed up their staff to use demand planning software instead. The latter rescues you and your staff and takes that heavy burden off of your shoulders.
Sales Forecasting Software Pros and Cons
Forecasting software advantages
Providing real-time data about forecasting solutions or demand planning with software is as easy as ABC. The human error is excluded, time-efficiency is included here. What may take days from an inventory manager to forecast and analyze with an Excel spreadsheet, is done within seconds using the software.
- Real-time and accurate data
It goes without saying that in forecasting solutions everybody thrives for accurate and real-time data. The best option for handling out-of-stock and overstock problems is preventing them. So, with forecasting software, one can rest assured about accuracy and deadlines.
- Easy-to-go data modification
In contrast to the Excel spreadsheet, you can make any changes you want with the use of forecasting software without margin errors and major problems. The software enables you to make required changes only wherever you mean to, without changing whole charts or cells.
Disadvantages of forecasting software
In general, there are no major disadvantages pointed out by sellers regarding forecasting software. The primary point to take into account is what kind of software you go for. The bigger the number of the software used or tried, the greater is the confusion that the methods they use are not depicting exact information.
Data collection process by Forecasting software
Data collection with the sales forecasting software is separated into two major parts: statistical and collaborative sales forecasting.
The statistical methods for generating forecasts include:
- Sales history analysis
It takes into account the past sales and the factors which have affected the sales (promotions, stock availability, etc). It should be noted that only the smartest software are able to do this.
- Trend analysis
It’s a statistical procedure carried out to evaluate linear and nonlinear relationships between two quantitative variables.
- Forecasting model selection
This method is implemented with the help of Exponential smoothing, Simple moving averages, Holt Winters, Croston, and other techniques.
Choosing a particular method now comes down to your business needs. What refers to collaborative methods of sales forecasting, they involve a review of the statistical outcome based on:
- Delphi- based consensus techniques
- Market survey
- Asking your sales team
However, you can avoid going deeper to so much information and details, when you opt for a sophisticated sales forecasting software. You will get the necessary data without extra efforts and wasted time.
Summarizing the information above, it remains to state that the beauty of sales forecasting with software cannot be underestimated. Comparing the advantages and disadvantages of both software and Excel options, we can conclude that the winner is the software. It’s conditioned with the possibility of providing more accurate and real-time data in contrast to Microsoft Excel.
The role of Excel in e-commerce will always be recognized and estimated, but the old times are gone and the main emphasis today is on time and efficiency when the speech is about sales forecasting.