Revenue and Profitability Guide for CFOs to Navigate Uncertainty

The goal of a finance office is to build bridges, break barriers, and enhance your sales, marketing, and FP&A teams. This can happen with the right forecasting software.

So. You manage finance for your business.

Are you having fun yet?

There is an astonishing amount of uncertainty in the market today. This uncertainty comes from a series of forces that seem to be conspiring to make the job of anyone in finance more difficult: war, inflation, COVID-19, and political uncertainty, to name a few. That means that your job is now tough. It also means that you have to be using new tools that break down barriers and build bridges between business units — like finance and sales — more than ever before. 

Fundamentally, this increased collaboration is the only way your business will navigate this period of uncertainty and manage to survive and thrive. However, it means you need new tools, strategies, and highly accurate forecasting models that work with your finance office to ensure you are using every tool and piece of data at your disposal.

So, what does that mean? At ForecastEra, we get it: You need good data, and you need it now. So, here are five steps to take to navigate this confusing time.

1. Real-Time Revenue Signals

What does this mean? The chief consideration is understanding your leading revenue indicators. What drives money in your operation, and what can you do to maximize those factors? 

Considering your understanding of leading indicators of revenue:

  • Is your pipeline coverage adequate? Do you need higher coverage based on rationalizing win rates? Remember, the best way to get this information is to look back at old data. From there, adjust historical win rates and if there is a need to factor for a down market. This strategy allows for better incorporation of existing data.
  • Examine your sales velocity. Are you seeing a change in the time to close deals? 
  • Check out your churn signals. Are any of your renewals at risk? Can you use this data to develop an early warning for potential problems, then make adjustments accordingly? 
  • Which products in your portfolio are nice to have vs. must-have for your clients? What does the data say? Can you shift sales bandwidth to products that are still an essential need for your customers even in a downturn? Which resources can you move to make such a shift happen? 

This also leads back to an important question: What tools do you currently have available that provide this information? Does your current software do so? If not, you may want to consider examining alternative sources of this information to ensure that the information you have at your fingertips allows you to make better-informed decisions. 

2. Sales to GAAP Revenue Conversion

The answers to the above questions should provide you with an excellent view of your renewals and new business projections. Getting these answers should also help you develop a better understanding of your revenue and be able to convert that data into booked and revenue realized.

Financial planning and analysis (FP&A) will require frequent collaboration, regular meetings, and appropriate revenue forecasting software to understand the impact of a changing revenue stream on revenue forecast. This information is critical to many areas, including:

  • Sales guidance and marketing dollar deployment. By working together, revenue and FP&A will help guide the deployment of sales teams in a manner that is most efficient and effective.
  • Annual planning and forecasting.
  • Investor guidance.

3. Bi-Weekly Meetings With Finance and Other Departments

Biweekly meetings are the best way to maximize your time and impact from these sessions. They can examine both short-term pressures and long-term deals that have renewal pressure. This examination can help you immediately begin to deploy resources appropriately. 

4. Cost Sensitivity Based on Revenue

Another method of examining costs is determining cost sensitivity based on revenue. To do this, classify your expenses into those directly related to client contracts. This classification can help you determine if you are likely to see pressure in winning renewals by giving a price break. You can proactively look for levers to reduce direct costs related to those contracts.

Keep in mind: You need to pursue these avenues now. Steps you take can involve moving people off of an account, reducing support time, reducing indirect expenses, and more. This can also enable you to slow future growth-related costs and slow down hiring until a relationship has been better established. 

5. Scenario Planning

The “what if” question is the bane of our existence in finance … what if the pandemic comes roaring back? What if our product goes viral and sales explode 20%? These are things you need to be prepared to manage. To that end, finance teams need to take all the inputs above and be ready to model flexible scenarios. These scenarios should be based on revenue increases or other potential scenarios. They must come with possible cost reductions that can manage potential revenue decreases. 

As you can see, the opportunities for your finance offices to break down silos and build bridges to other areas of a company are endless, and it is more important than ever for a finance office to work with other departments to develop this information and make the necessary collaboration.

This also means you need the most accurate forecasting tools to develop this information. If you are looking for that data, ForecastEra can help: We have developed an array of highly up-to-date and robust financial tools that can allow you to make informed decisions, boost sales, and enhance the competency of your financial operations.

Want more information? Contact us today to schedule a demo and learn more about how we can help your business improve its finances and make more accurate predictions than ever. 

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