Jim Dickie is known to many. He is a founder of CSO Insights (now part of Miller Heiman Group) and runs Sales Mastery Group. Jim is the author of The Chief Sales Officer’s Guide to CRM and Insights into High Tech Sales and Marketing, and he co-authored The Sales...
As a Chief Financial Officer (CFO), you know your role is a pivotal part of the board of directors for a company. Although you are ultimately responsible for reporting the numbers — especially the revenue forecast or projections — you often know the least about the accuracy of those numbers. You have to rely on your sales leads to give you the story. And it’s not always the real story.
To get that real story, you have to learn the psychology of the sales leader in your organization and the art of calling BS based on gut instinct. Especially once you get a new sales leader, and don’t have a track record with them. Reaching out to your sales reps can help you get the real story, but it can also be very disruptful for the rep (as they now start spinning cycles on managing up). And it’s certainly not scalable across all the deals.
Accurate sales forecasting is an art and a science, and getting it right is a critical part of running an agile, forward-focused business. That’s why great CFOs don’t just leave getting the story behind the numbers to chance. Here are some best practices that we compiled from CFOs that have a track record of success, and who are leading the charge in their discipline.
1. Hold the VP of Sales accountable
Don’t just take everything you’re given at face value during forecast calls. Great CFOs keep their VP of Sales accountable by taking an active role at the individual deal level.
Remember that your forecast numbers are the sum of the dollar amounts of individual opportunities, and insist on visibility at that level. Keep an eye out for changes from one forecast call to another: Which deals have been removed from the forecast? How have the numbers of individual deals changed?
When you notice changes, dig in with questions to understand why the forecast has shifted for certain deals, and which deals will replace ones moved out of the forecast.
Rather than starting a new sheet to write down the forecast or using a new CRM report on every call, make a copy of the previous call’s forecast sheet so that you can ensure each deal has been accounted for. Mark each deal as being still in the forecast, demoted to Upside, or removed from the pipeline altogether.
2. Ask questions to get past the circular sales speak
CFOs know that when you ask a question about a deal to your sales team, you’ll get a story. The problem is that not all of those stories are useful when it comes to seeing the true sales potential of a given deal.
Instead, great CFOs know how to dig beyond the story. Having direct access to the seller’s opportunity notes or buyer communication is one good way to identify potential deal risk. Another is to learn the art of asking specific questions without making it feel like interrogation.
When a deal is promoted to Committed or demoted to Upside, don’t just ask for a report. Dig for details about what changed in order to get a real understanding of the deal’s health.
When going over the forecast sheet, take note of the story being told about each deal, and ask specific questions to get beyond that initial story. This approach works best when you have developed a good relationship with your sales team.
3. Validate VP of Sales data
Great CFOs don’t blindly trust the numbers given to them by their VP of Sales. Instead, they validate those numbers by triangulating the forecast to the experience of the front lines.
Your frontline sellers and managers have an intimate knowledge of the status and promise of individual deals. Building relationships with those members of your team allows you to go directly to them for their thoughts, and get a better pulse on how certain opportunities are shaping up.
Of course, you don’t want to undermine your VP of Sales’ authority by asking for a second opinion from their direct reports. Rather, you want to cultivate a dialogue with the front lines that gives you both more insight.
The old adage “Give before you ask” is very applicable here. The best way to build front line relationships is to work with team members to identify how you can help, then be receptive to listening.
4. Keep a forecast accuracy track record
Forecasting is a matter of using the power of probabilities to predict the future — or at least using probabilities to determine some band of future prediction. And sometimes it can feel like you’re consulting a Magic 8-Ball.
Get more confidence in your forecasts by keeping a forecast accuracy track record. Compare the previous correlation between a forecast call and the results to determine the delta (the difference between the plan and what actually happened). By tracking the historical deltas, you can more confidently calibrate your forecast.
Keep track of forecast call history, then write down what actually happened on the same spreadsheet row. Then divide the “actual” figure by the “forecast” figure to determine the delta.
5. Make their own call
Part of a CFOs role, especially in a mature selling organization, is to present sales numbers to the CEO, board members, and other stakeholders. It can be tempting to rely on the numbers given to you by the VP of Sales, but great CFOs make their own call.
Make sure you have access to the roll-up forecast coming from the individual sellers or — at a minimum — the front line managers. Then, triangulate multiple data points to acquire your own understanding of the data.
Keep your own spreadsheet or a secure area of your forecasting tool that is only available to you and the CEO. You can then use that number to forecast the business to stakeholders.
Accurate data driven forecasting is now possible
As a CFO, you know data doesn’t lie. The major challenge of all CFOs, however, is getting enough correct data from the source.
If your efforts to push your sales leaders to provide the data you need has been a failure, you might be stuck dealing with spreadsheets and stories as you try to piece together a monthly forecast. But these days, systems have matured enough that organizations can get access to the data without putting additional burden on the sellers and sales management.
If you are ready to get to the truth behind your sales numbers, reach out to us, We’ll be happy to share how others are solving the problem of forecast accuracy with AI-based sales forecasting software.
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