Pipeline Clarity: How CPQ Sharpens Your Sales Forecasts

Forecasting is a critical aspect of every sales operation. It’s what helps the department plan and strategize for the future.

Accurate sales forecasts provide insights into customer behavior, market trends, and overall revenue projections. Businesses use them to make informed decisions about resource allocation and budgeting.

That said, creating accurate sales forecasts is complicated. Although most sales reps spend at least 2.5 hours per week on forecasting, their predictions are generally less than 75% accurate.

Sales forecasts are entirely dependent on the data and insights you use to create them. Without the right software and integrations, your data won’t be good enough to give you a clear picture of your sales pipeline. And that’s precisely what most sales teams lack.

When it comes to making sales projections, CPQ (configure, price, quote) is the tool that changes everything.

Challenges of traditional sales forecasting

Modern sales teams deal with a lot of data — sales data, customer data, product information, you name it. This makes manual forecasting virtually impossible.

Spreadsheets are commonly used to collect, organize, and analyze data. But they come with limitations.

• Spreadsheets don’t integrate well with other business tools. You’ll have to spend significant time and effort importing and exporting data.
• Manual calculations are prone to human error. Spreadsheets can’t validate data or provide real-time updates, making it difficult to accurately value a potential deal.
• Data silos hinder collaboration and visibility. With spreadsheets, data is stored in different files, making it difficult to access and share. This leads to discrepancies and misalignment between sales and finance teams.
• Inadequate data leads to inaccurate forecasts. Sales reps may miss important data or enter it incorrectly, leading to unreliable forecasting.

Beyond that, the sales department faces significant challenges today that they haven’t in the past (not in the same way, at least).

Economic uncertainty

Economic instability remains a critical issue. In the last four years, consumer prices have increased 20.8%. And with that, spending goes down across the board.

Accurately predicting sales becomes difficult with potential budget cuts and delayed purchasing decisions on the horizon. This causes mismatches between budget expectations and actual spending, complicating the sales pipeline forecasting process.

Longer sales cycles

Sales cycles are becoming longer as consumers take more time to make purchasing decisions due to economic concerns. Now, the benchmark sales cycle length is 102 days.

The overall lengthening of the sales process hinders forecasting accuracy, as deals take longer to close and face more objections along the way.

Increasing product complexity

In industries like SaaS and B2B manufacturing, products are more than just a single item. They’ve got tons of variations, add-ons, and customizations that impact pricing.

Spreadsheets alone cannot account for these variables. This leads to inaccurate forecasts as reps can’t accurately predict the value of a deal or the resources needed to close it.

Intricate, marketing-driven buying processes

As products and offers become more complicated, so too do the processes involved in making a sale. Nowadays, deals often involve as many as a dozen decision-makers and stakeholders, adding complexity to the sales process.

On top of that, buyers now spend almost half of their time conducting independent research, reducing the frequency and reliability of face-to-face sales interactions (Gartner says three-quarters of buyers prefer a rep-free experience). By the time they talk to sales, Gartner estimates they’re as much as 70% of the way through the decision-making process.

This means more variables to consider when forecasting — delays in decision-making, changes in budgets, bureaucracy, and key buying group members leaving.

This shift makes it harder for sales teams to gauge the likelihood of deal closures, impacting the reliability of their forecasts.

Technology integration

Lots of organizations struggle to implement AI tools effectively, leading to incomplete or inaccurate sales data. While these technologies can enhance data collection and analysis, ensuring they complement human efforts without diminishing the personal touch is vital.

How CPQ improves sales forecasting accuracy

Sales reps use CPQ software to configure products and bundles for their customers, calculate input and final prices, and generate quotes that accurately reflect the costs of a deal. What you might not know, though, is that it’s the single most powerful tool in today’s sales landscape for optimizing sales forecasts.

Since it’s the main point of contact between sales reps and their customers at every stage (up to and including the transaction), CPQ has all the data necessary to make sales predictions.

It eliminates the pain points of manual forecasting by automating data collection, streamlining processes, and providing real-time insights into every aspect of the sales pipeline.

Let’s dive in.

Accurate quote generation

CPQ software eliminates human error by validating and storing data in a central location, eliminating redundant manual inputs. It also calculates pricing automatically, so there are no mistakes in deal value estimation — one of the biggest causes of forecast inaccuracy with traditional methods.

With guided selling, CPQ also helps sales reps identify relevant discounts, promotions, and pricing for specific products or configurations. The tool works by prompting the sales rep with questions to determine customer needs and using that information to generate optimized pricing.

From there, the rep can adjust prices, discounts, and promotions to come up with the most accurate quote for a particular deal. And that information is what feeds into the sales forecast.

Real-time updates

As soon as a quote is generated or edited, CPQ collates all the information related to it in real-time. This gives sales teams up-to-date insights into the health of their pipelines.

It shows them where each deal is in the pipeline and how much effort has gone into closing it thus far. With this information at hand, they can make better-informed decisions about which leads to prioritize based on their likelihood of conversion.

Real-time data integration

It’s not just about updates. CPQ can integrate with other departments and their systems, including:

• Sales operations via CRM integration
• Supply chain operations via ERP integration
• Finance and order management via billing integration

With a completely integrated tech stack, all your forecasts will reflect current pricing, demand, and product availability.

Improved visibility into deal pipelines

Since it has product- and configuration-level data, CPQ gives you insights into:

• Your product mix, and which products are performing best
• Trends in customer demand
• Price sensitivity across different customer segments
• How customers react to different price points
• How much of an impact changes in product availability have on sales
• How long it takes to close deals based on the complexity of a product or bundle

This information is as valuable for forecasting as it is for optimizing your business operations. By understanding where customers are in the sales process, you can more accurately predict when they’ll close, how much revenue each will generate, and when you can expect that to flow in.

You can also use it to find upsell and cross-sell opportunities, account for periods of higher and lower demand, and forecast the success of future products. All of these factors contribute to a more accurate sales projection.

Collaboration and transparency

CPQ’s collaborative features, like team selling, quote/contract editing, approval workflows, and digital sales rooms, enable everyone involved in the sales process to collaborate, streamline communication, and make decisions in real time.

They also facilitate communication between sales and finance teams. There’s no more guessing or relying on outdated spreadsheets, as everyone has access to the same real-time data.

This leads to better collaboration and alignment between teams, which in turn results in improved accuracy once the finance team makes projections.

Benefits of improved sales forecasting accuracy

The accuracy of sales forecasting has a direct impact on your organization’s bottom line (and, really, everything else).

As far as sales projections are concerned, here are a few benefits you can expect from using CPQ:

More accurate revenue projections

By eliminating manual errors and incorporating real-time data, CPQ provides a more accurate picture of your future revenue potential. This allows for better planning and decision-making at the executive level.

Better resource allocation

With accurate forecasts, your cash flow is a lot more predictable. That means you can allocate resources more efficiently and effectively. This means less time and money wasted on pursuing deals that won’t close.

Improved decision-making processes

When you know which leads are most likely to convert and which products are in high demand, you can make smarter decisions about how to allocate your budget, prioritize leads, and manage inventory.

A more productive sales force

With automated processes and real-time insights, sales reps can spend less time sharing data and dealing with administrative tasks. They can focus on closing deals, which leads to higher sales productivity and increased revenue.

Strengthened investor relations

Investors rely on accurate and transparent sales projections to make informed decisions about the future of a company. With the help of CPQ, you can give every investor and potential investor reliable data to support your company’s growth plans.

Increased customer satisfaction

When you know ahead of time which products will increase and decrease in demand, you can meet customers where they are. When in-demand products are readily available, customers are happier.

Optimize revenue growth with CPQ.

CPQ is more than just a tool for creating quotes. It’s ability to source and centralize sales and customer data makes it a critical component in your organization’s overall sales strategy.

By using CPQ, you can gain real-time insights into your sales pipeline and make more accurate forecasts. With improved accuracy comes increased revenue growth, better resource allocation, and stronger relationships with investors and customers.

Ready to invest in CPQ? To learn how to use your system to the best of its abilities, take a look at my guides to maximizing ROI from your CPQ system and boosting revenue growth with CPQ analytics.