How to Fix Sales Forecasting with Revenue Performance Management
Traditional sales forecasting processes are broken, especially in this economy. Instead of using top-down sales forecasting, real-time, continuous bottoms-up revenue forecasting gives companies the visibility to see what changes in the forecast matter most and why they occurred. Armed with this information, executives can hold the organization accountable to the forecast. Knowledge Center contributor Southard Jones explains how to use revenue performance management to proactively identify market trends and guide strategic business decisions.The eWEEK Knowledge Center recently published an article by contributor Joe Ruck on sales forecasting. While I agree with his diagnosis that forecasting is rife with challenges, I disagree with his prescription. Mr. Ruck's article treats forecasting as a means to answer the question "What will top-line revenue be?" Instead, the true value of forecasting lies in creating an actionable revenue forecast that provides the entire organization with detailed information to drive execution. You may even call this comprehensive process that goes beyond sales forecasting "revenue performance management."
It is estimated that companies miss the equivalent of 10 percent of total annual sales in lost opportunity revenue that could have been captured as a result of better insight on sales activities and target markets. Here's an example: Company XYZ has a top-level forecast that predicts a price decay for a particular product line in the Asia Pacific region. The executives feel fortunate to have seen this shift coming and lower prices to match the forecasted competition. The business swallows the lost revenue, but survives because it doesn't completely lose the market.