3 Steps for Aligning Sales and Finance Forecasts

By Patrick Kellenberger

In most organizations, both finance and sales use complementary methodologies for forecasting out the company’s future bookings. But let me know if this sounds familiar:

Sales: “Forecasted sales for next month are going to be $1M.”
Finance: “The pipeline shows that sales are only going to be $500k!”

A back and forth ensues to determine who’s correct and hours are spent to come to the conclusion that the forecast lies somewhere in between.

This is consistent across most organizations and it’s obvious that the truth of forecasting lies somewhere in between what finance knows and sales knows. In the majority of cases, sales is over-forecasting because of some additional factors like sales goals that they “have” to hit, while finance is under-forecasting as historical information hasn’t caught up to the new initiatives from the sales team.

In this post we will explore how communication and the proper sales tools can create a strong synergy between sales and finance, yielding increased visibility and accountability within your company’s forecasts.

Disclaimer: I live and breathe finance, so I will try to keep my biases under control!

Step 1: Align Expectations

The first step to syncing sales and finance is to align expectations around the results you are looking to achieve with your bookings forecast. If expectations have been set at 100% accuracy over the next twelve months, then it might be time to have a sit down to realign.

For example, a company’s accuracy expectations should be limited to its sales cycle, so if your sales cycle is 3 months, then you should be 70-90% accurate up through that quarter. Any forecasts outside of that cycle should be viewed as an opportunity for change, not as a foregone conclusion.

Here is where sales and finance have the opportunity to sit together and change the business by adding headcount, realigning outbound campaigns, improving data integrity within the CRM, boosting efficiencies, etc. In aligning expectations you must make sure boths sides understand how the other is getting to its forecasts and are bought into the methodologies as two sides of the same coin.

Step 2: Choose Your Forecasting Method

To make the above possible, you need to engage with a sales tool where you can extract matching datasets for both the finance and sales methodologies, ensuring alignment at the end of the process.

In my experience, sales leaders traditionally forecast the business through Rep-Based Forecasting Methodology. Using this method, managers meet with reps to go over the deals in their pipe and determine close likelihood and timeframe. This gets consolidated until you have a complete view of the company.

While custom CRM fields can help streamline this process, they can also be tough to manage. Base takes a refreshing approach to deal scoring by automating it through the scoring module in the admin settings, along with providing an accurate forecast close likelihood through an internal algorithm.

Understanding rep activity reporting through an all-in-one tool where e-mail, phone, and text are all captured within the system is also vital for accurate and complete sales forecasts.

On Go to the full article.

Source:: Business 2 Community

Be Sociable, Share!