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A Go-to Guide on Exponential Smoothing in Google Sheets

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Sales managers usually use an easy and quick annual run rate when determining quotas. But the annual run rate is sometimes far from the most specific metric. Though the exponential smoothing in Google Sheet is a more complex sales forecasting process, it is debatably better. It is used for more precisely predicted product life cycles, future sales, and even the number of changes across various industries. The exponential smoothing method offers you the information you require to make the best decisions in every aspect of the company.

What is exponential smoothing?

Exponential smoothing analyzes statistics from a specific period by prioritizing the newer data and giving less importance to the older ones. This method generates “smoothed data,” or data that has the disturbance removed, letting trends and patterns be more evident.

When it comes to projecting sales, understanding statistics is done by an exponential smoothing forecast that gives this method a control as the exponential smoothing in the Google Sheet formula gives more weight to the newest sales performance data. For instance, if you use exponential smoothing to evaluate 12 months’ sales revenue, the exponential smoothing formula will prioritize the last month’s earnings over the previous year.

One of the major differences between exponential smoothing and a traditional annual run rate is that a run rate projects numbers from a specific time to a whole year, assuming those numbers stay fixed going forward. With exponential smoothing, the user can decide how much weight is put on the newest data by selecting a smoothing constant in the exponential smoothing formula. The larger the value of the constant results in more weightage in the recent data.

Exponential smoothing forecasting involves the assessment of values we don’t know via values we already know. There are many forecasting techniques, and exponential smoothing in Google Sheet is just one of them. Exponential smoothing is a procedure used to distinguish important changes in data by checking the most recent data. Also known that averaging, this method is used for making temporary forecasts.

Given that there are many ways to make predictions, what makes exponential smoothing preferable in some cases compared to others? Also, what makes it perfect for some scenarios?

List of benefits of exponential smoothing

  1. Easy to understand and apply.

Only three forms of data are compulsory in exponential smoothing methods. One, it requires the forecast for the newest period. Two, it requires the real-time value for that period. And third, it requires the value of the smoothing constant, which determines the weight provided to the recent data values.

  1. Generates accurate forecasts.

An exponential smoothing in the Google Sheet method offers a forecast for one time ahead. Using this trend projection method help forecast more periods. The forecast is considered very accurate as it accounts for the difference between actual projections and what happened.

  1. Gives importance to recent observations

Observed statistics is the total of two or more values, one being the usual error which is the difference between the true value and the observed value. In an exponential smoothing method, the usual variation is ignored. As such, it’s simpler to check the underlying phenomenon.

Apart from these there are other benefits too like:

  • Sales forecasting helps companies get the most effective approach for attaining the forecasted sales.
  • Sales forecasting helps you produce numbers used to assign resources to different departments.
  • Sales forecasting influences the return and sales quotas of your sales team.

Conclusion

Exponential smoothing in Google Sheet is the core of every business as it helps you decide how much revenue you will generate and what actions to take when you fall short. This helps you decide how many more deals, leads, and opportunities you require to hit the number. If you do this early, then you can do the necessary changes. When you perform sales forecasting, you can access a treasure of information and insights that help improve your sales actions and business decision-making.

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