formerly FinancialForce
formerly FinancialForce
We’ll just say what we’re all thinking – forecasting is hard! Or, at least, it can feel difficult as it requires insight into historical performance data, knowledge of your current financial position, and a numbers-based strategic plan for the future. We agree there are a lot of details to manage, so in this article, we’re going to explain how to forecast revenue accurately and efficiently using professional services automation.
If your business is not prioritizing – or even conducting – revenue forecasting, you’re not alone. In fact, Gartner found in a 2020 study that by 2025, a staggering 90% of B2B organizations will continue to rely on intuition rather than data analytics for revenue forecasting.
Intuition is great for some things – recognizing that a friend is in need or that you’ve met “the one”. However, it is not great for activities that are firmly rooted in data and logic, like revenue forecasting (for example).
Accurate revenue forecasting is driven by data related to profits, expenses, and cash flow, among other metrics, and helps frame up your current and future growth strategies and planning by giving you a complete financial picture. It’s difficult to know where you’re going if you don’t know where you’ve been – or where you are – which is why for professional services organizations in particular, revenue forecasting is crucial.
Certinia Professional Services Automation (PSA), Rang 1 auf G2, nutzt die Leistungsfähigkeit von Salesforce CRM und der Salesforce-Plattform. Verschaffen Sie sich einen beispiellosen Überblick über Ihr Geschäft in den Bereichen Vertrieb, Dienstleistungserbringung und Finanzen. Halten Sie Projekte pünktlich, Kunden zufrieden und Berichte auf dem neuesten Stand – alles auf einer integrierten Plattform.
There are a few primary reasons behind Gartner’s finding that such a high percentage of businesses would continue to shirk data-driven, automated forecasting solutions well into the 2020s.
A lack of understanding of the importance of accurate revenue forecasting.
Organizations that cited “intuition” as their forecasting method of choice may be averse to change or are simply wary of adopting new technology. Whatever the reason, there is no arguing that an automated forecasting solution will provide long-term business benefits.
Reliance on spreadsheets and other manual processes.
Organizations that use “analog” processes for revenue forecasting often take longer to adopt a platform solution as it requires a culture and mindset change in addition to onboarding new technology.
A lack of trust or confidence in the practice of revenue forecasting.
Business leaders may see forecasted numbers as unreliable or may believe their company doesn’t produce enough data to make revenue forecasting worthwhile.
We would argue that in terms of business benefit, there isn’t much difference between conducting revenue forecasting poorly and failing to conduct revenue forecasting at all.
However, companies doing some type of revenue forecasting, even ineffectively, are at least of the mindset that it’s a practice worth doing.
Before we dig into how to forecast revenue and what accurate revenue forecasting can do for your business, we’re going to briefly outline the consequences of failing to forecast or forecasting poorly.
Workflow automation provides enterprise-wide visibility into all tasks and processes, allowing your teams to spend less time on tedious, manual processes and improve operational efficiencies. When you’re able to effectively monitor and manage often complex business processes, you gain greater control over cash flow, expenses, profits, how your revenue is being generated, and how customer behavior impacts your bottom line.
Read More: Workflow Automation: Why You Need It and What It Can Do For Your Business
Being able to anticipate product needs, service renewals, and opportunities for upgrades or upsells to your customers is a big part of revenue forecasting. To set goals for hitting sales targets that are as accurate as possible, you need to know your customers well – what are their buying habits? What are their product needs? Where are they in the customer lifecycle?
Read More: A Guide to Mastering Customer Lifecycle Management
When projects are delayed for any reason, your bottom line suffers. Your company may lose money while work is stalled, especially if you’re paying for third-party resources to complete elements of the project, and you may lose additional revenue from longer-than-expected project timelines. Another drawback to project delays is that other projects in the pipeline may also be delayed or stalled due to resources being tied up or simply because there is no predictable schedule. Proper scope planning and analysis allows you to better manage projects from start to finish, ensuring you can accurately predict revenue rather than find yourself short of projections.
Read More: Scope Planning and Analysis for Effective Financial Management
Have you ever accessed a report on a client engagement and found none of the information you’re looking for? Each step of a project should be tracked and recorded to ensure budget, timeline, and deliverable projections can be accurately mapped back to real-time activities.
To empower effective tracking and reporting, you need an automated solution that sets your employees up for success. Providing visibility into key metrics and project milestones helps your team get the information they need to make actionable decisions.
Accounting errors happen more frequently when companies rely on manual processes like spreadsheets for data entry and management. A rogue decimal point or missed entry can throw off your records significantly. Further, revenue leakage also presents problems for companies as a result of manual processes. Revenue leakage is the unintentional and unnoticed loss of revenue, typically stemming from unbilled or underbilled service hours or products – essentially, you’re doing the work and not getting the right amount of compensation.
Without an automated solution that creates a single source of truth for revenue management, you risk these critical oversights during client projects, as well as delivering a negative customer experience as a result.
Read More: How to Prevent Revenue Leakage in Professional Services
Do you know exactly how much time to allocate for projects, or how much time is potentially lost when your employees spend time in meetings, responding to emails, transcribing notes, or attending trainings?
There will always be company time spent on business development or project management tasks, but if it isn’t correctly allocated in your overall budget and accounted for in revenue projections, you’ll be unable to forecast revenue correctly. The time spent actively working on projects is the most critical to understand in order to accurately predict revenue.
Read More: Effectively Track Billable Hours With Cloud Software
These consequences of poor or nonexistent revenue forecasting are all bad for business, plain and simple. And regardless of where business leaders stand on prioritizing revenue forecasting, one item of consensus is wanting business success.
So let’s look at how to forecast revenue accurately using an automated solution, and some of the ways this practice can boost your business today and in the future.
The most important thing to remember about revenue forecasting is that it isn’t one-and-done. It’s a continuous effort that must be adjusted and readdressed as business and strategic goals change.
If your company begins working with a new client who has highly-specific project needs, you may be taking in more or different data that needs to also be accounted for. With an automated revenue forecasting solution, you can easily adjust your data inputs to include this new client, and you’ll see the ripple effect on your forecasting outputs.
Here are the ways you can use an automated solution to accurately forecast revenue, and the benefits to your business.
If you’re conducting business, you have data. Mining through complex data sets to find the nuggets that will inform business decisions and strategic operations is no job for a single human. An automated solution takes in data in real-time, provides enterprise-wide visibility, and allows your teams to access and analyze data at any time, and deliver insights to solve business-critical decisions.
Why it matters for revenue forecasting: Accurate data capture ensures your forecasts stay on track, which means sticking to project deadlines, issuing correct billing amounts, and understanding if you have the bandwidth to accept new projects.
Companies often struggle with over- or under-utilization of resources. If you have tons of resources available, you’re not working at full capacity. Moreover, if you consistently struggle with resource availability, you’re not staying on top of project schedules.
Why it matters for revenue forecasting: Proper resource utilization ensures your company isn’t spending unnecessary money on unused resources, or losing money on project delays or stalls due to unavailable resources.
Real data is always better than intuition. When you have the latest information about your projects, you can plan strategically for resource availability and account for any scheduling constraints.
Why it matters for revenue forecasting: Revenue forecasting should be based on the latest information available so you can properly allocate time and resources and protect your bottom line.
Real-time data is great, but historical data can also be highly informative to predict the level of effort required for a similar project. Similarly, using past data can also identify reasons for profits and losses so you can apply the best approach this time around.
Why it matters for revenue forecasting: Rather than make guesses, you can use historical data to be more confident in creating revenue projections on a per-project basis, especially when other data may not be available.
Revenue forecasting is only as effective as the technology you have and the data it uses, and while the process may seem complex, an automated solution can simplify it dramatically.
Contact us today to schedule a demo and learn more about how professional services automation can help your business more accurately forecast revenue and more effectively plan for the future. Our single-platform solution runs on the Salesforce cloud and helps you put your customers at the center of everything you do.