4 steps for aligning sales and finance forecasts

In most organizations, both sales and finance use complementary methodologies for forecasting 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 approach is consistent across most organizations, and it’s obvious that the truth of forecasting lies somewhere in between what finance knows and what 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 explore how aligning expectations, integrating data, choosing the right forecasting methods, and streamlining communication can create a strong synergy between sales and finance, yielding increased visibility and accountability within your company’s forecasts.

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

Align sales and finance 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 realign.

For example, a company’s accuracy expectations should be limited to its sales cycle, so if your sales cycle is three 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

• And more!

In aligning expectations, you must make sure both sides understand how the other is arriving at its forecasts and are brought into the methodologies as two sides of the same coin.

Integrate sales and finance data with a CRM

To align expectations, use a sales tool that allows you to extract matching datasets for both finance and sales methodologies. Integrated data provides a holistic view of the complete customer journey.

Integrate your billing and invoicing system with your CRM so data from expense reports, payment schedules, and purchase orders are synced and can be easily reviewed for forecasting reports. You also won’t have to enter data more than once.

Peritus Digital, a technology consulting and development agency and Sell customer, knows firsthand the benefits of integrating a CRM. When the company couldn’t find an invoicing system to efficiently manage subscriptions, they developed Paycove, an invoicing system that could be integrated with Sell’s API (application programming interface).

Now, when a completed deal is sent to the “pending close” stage, a series of events occurs:

• An invoice is automatically generated

• Information is sent to the right contact

• Everything is automatically logged in Sell

• Both the sales and the finance department can see what happened and when

This is what happens when data is integrated rather than isolated by department.

Activity reports should be accessible to both the sales and finance departments.

Additionally, the finance team needs access to sales rep activity reports showing calls made, emails sent, appointments held, etc. That way, they can track activity in the sales pipeline, which is important for determining if a deal will close or not.

The finance department should be able to track the purchasing process, as well as see what efforts are being made to close a sale and understand the reasoning behind certain sales forecasts.

Choose your forecasting method

Forecast stages – a qualitative rep classification method

In my experience, sales leaders traditionally forecast sales through Rep-Based Forecasting Methodology. Using this method, managers meet with reps to go over the deals in their pipeline and determine close likelihood and time frame. 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. Sell takes a refreshing approach to deal scoring as it automates through the scoring module in the admin settings and provides an accurate forecast close likelihood through an internal algorithm.

On the finance side, the methodology I have seen to be the most accurate and provide sales leaders with the most visibility is also one of the most simple: Pipeline Methodology. The formula for this method is as follows:

Pipeline * Sales Cycle * Close Rates = Bookings Forecast

And without going into too much detail, we can extend the forecast past our sales cycle by adding another component to the formula, which is New Pipeline Generated each month. Sell actually provides each of the variables needed to run this methodology through its reporting functionality.

Having a single, accurate source of truth is vital to both creating the forecasts and the ability to bridge the gap between what finance and sales each know. Once your company is aligned on forecast expectations and methodologies, the last step is to ensure communication, consistency, and accountability on both sides.

Streamline communication between sales and finance

Communication is the most important piece of this entire process and without it, you will end up with two siloed departments at odds with one another (as we’ve discussed with marketing and support departments). Every business is different, but they all have one thing in common: the sales team is better at selling and the finance team is better at financing (hmmm… that’s not right).

In all cases, sales is lacking pieces of information that finance has and finance is lacking pieces of information that sales has. To ensure effective communication, there are several methods you can implement:

• Hold monthly leadership meetings. Spend half the time doing a post-mortem of the previous month and the other half planning for future months.
• Create a team email alias. Create a new email address that sends mail to members of both sales and finance. This way, important information for both teams can be sent to one account. Messages and conversations are then easily accessible and don’t fall through the cracks.
• Provide context. Encourage collaboration between sales and finance teams, so goals are understood across departments. Set up days for sales members to shadow the finance team and vice versa.

Some months might seem repetitive as large changes don’t necessarily happen that quickly, but consistency is crucial. Without consistent meetings and communication, both parties will miss out on time-sensitive opportunities, either for improvement within the process, efficiencies within the business or, more importantly, opportunities for top-line growth.

Meetings should be structured to create accountability on both sides while fostering a relationship in which finance and sales feel like one strong team instead of two siloed departments. This means that both sides need to be prepared, viewed as peers, have the same opportunity to converse, etc. And of course, always keeping in mind that both sides are working towards the same goals!

Achieve more accurate forecasts

The more accurate your forecasts, the better decisions you can make for your company. Aligning sales and finance forecasts ensures that all factors are taken into consideration and numbers are closer to actual future bookings. Implement the above strategies to reduce the frustrating back and forth between departments. Your forecasts and relationship with the finance team will improve as a result.

Your CRM plays an important role in achieving aligned forecasts. Choose a CRM that connects data and communication for both the sales and finance departments. Check out Sell and our finance integrations.

This post originally ran on the Base blog. Please visit www.zendesk.com/sell if you’d like to learn more about Zendesk Sell.