This Is How Finance Teams Help Drive Better Sales Forecasts

Sales and finance teams rarely see eye-to-eye on sales budgets and forecasts.

A sales forecast estimates your company's revenue within a specific period. It’s also a key input the finance team requires to develop a financial forecast which estimates a company's income and expenses. The more accurate your sales forecast, the better your company’s decisions will be.

Unfortunately, in most companies, sales and finance teams work in silos, resulting in inaccurate sales forecasts. Time and again, finance teams curb sales forecasts by as much as 25%, as sales forecasts are often too optimistic. Traditionally, sales teams are caught up in meeting quarterly numbers and fail to see the bigger picture of the company's financial health.

“In many companies, sales has long been a kind of ‘black box’. The department is essential for meeting quarterly revenue targets, but it tends to be hermetically sealed off from other parts of the business.”

Frank V. Cespedes, senior Harvard lecturer, and author

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Why do sales and finance teams work in silos?

In an ever-changing and tough macroeconomic environment, it is more important than ever for sales and finance teams to collaborate. However, both teams function in silos as fundamentally, both teams have varied goals.

While CFOs focus on cost and efficiency, sales leaders are under pressure to drive revenue and growth.

Both parties believe that a strong customer relationship is directly tied to the business' health. However, no common data or software is in place to measure the value of customer relationships. The KPIs tied to sales incentives are not firmly related to the parameters used by finance to measure profitability.

Misaligned goals and the lack of a single collaborative platform deepen the divide between sales and finance in the following ways:

Goals

While both teams work towards the same company goals and vision, sales teams are concerned about customer relationships and closing deals, which can at times cause friction with the finance team’s concerns on excessive spend.. Finance teams come equipped with data, analysis, and recommendations that take the business forward. Due to misaligned goals, such data is not shared promptly with sales, so the team is unable to ground their forecasts in the current and future state of the business given the state of the economy.

A lack of connected systems‍

As sales and finance teams operate on different tech stacks, data between the two sources vary wildly. Moreover, data gets collected at different points of the customer journey. Sales teams might be missing important context that leads to misjudged decisions.

Sales teams use spreadsheets or Customer Relationship Management (CRM) software that are not connected to financial models and budgeting and forecasting systems.

Moreover, manually handling data flow is complex and prone to errors. If there are no singular records, shared databases, and unified toolsets centered around the customer, sales and finance teams will sacrifice valuable time on manually establishing a single source of truth rather than taking the company forward.

The CFO is not a strategic finance business partner

‍In today’s world, finance teams must apprise sales teams of the changes in the economic outlook. An unexpected pandemic led to unprecedented churn for many companies. CFOs have access to data they use for top-level decisions like planning and budgeting. Insightful data from the CFO and the finance department can help sales make informed decisions on whether to cross-sell, bundle-sell, increase discounts, or take any other approach.

Source of truth challenges‍

Software used by both teams comes with built-in analytics or reporting that helps interpret data better and is available in visually appealing dashboards. However, the leadership team doesn't have a holistic view of all metrics required for improved strategies as the underlying data is different across the software.

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How can sales and finance teams work together?

Aligned Goals

‍Sales and finance should properly understand each other’s goals before aligning them. Businesses can't thrive with growth alone at the expense of profit. The finance team should have frequent meetings with sales leaders about how to align growth and profit goals for a company's long-term health.

Connected CRM and ERP systems‍

An integrated CRM and ERP system will help both teams maintain a single source of truth. Also, shared data can help both teams collaborate efficiently and break siloed work. Integrated CRM and ERP systems help break silos by maintaining a single source of truth on which both teams can collaborate. Automated data flows help further sustain this merge of departmental data by preventing human errors and easing the maintenance of integrated data sources. For both teams to have a two-way dialogue on sales goals, objectives, sales forecasts, and more, they should be working on the same data.

Common reports and dashboards‍

Shared data alone will not help teams to work together. Sales and finance should also share a common repository of reports and dashboards. Shared reports and dashboards will help both teams to ask better questions and have productive meetings. Finance teams will have insights into sales generation and forecasting, while sales can generate more realistic forecasts based on financial insights.

Enabling sales as a finance leader ‍

CFOs can help sales teams focus on value-based selling, where sales teams are customer-centric and keen to provide value to the customer rather than pitch to meet a quota.

Accurate sales forecasts are critical to the growth of your organization. If sales forecasts are too optimistic, you could be left with a cash flow shortfall that will create ripples throughout your organization for many years. While sales forecasts from sales teams lean more towards the optimistic side, forecasts from finance are conservative. A blend of both is required to set a sales forecast value that is realistic and attainable. CFOs should have cadence meetings with sales leaders to help the latter quantify results to expenses. When both teams start to track ROI (Return on Investment), sales forecast numbers won’t have eyebrow-raising variations.

Make data-driven decisions‍

Data must be at the forefront to respond quickly to changing business situations. Finance teams should not only use data for top-level decisions but also in their day-to-day, including sales operations.

“A lot of profit can fall in between the operational cracks, and analytics can be a game changer in the way it leads to improved operational discipline."

Ajit Kambil, PhD and global research director of Deloitte's CFO program

Finance teams can help sales understand the current state of the business, its runway, and shifting priorities emerging from a volatile economy. Finance can also help sales determine their KPIs. Profitability KPIs in particular have the potential to increase sales and finance collaboration, as the teams navigated economic uncertainty together.

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Is there a one-stop solution to foster collaboration between sales and finance?

Without a shadow of a doubt, Pigment!

Pigment helps unite teams by unifying data sources and providing a collaborative space for sales and finance teams to work on forecasts. Here’s how Pigment can help produce more accurate sales forecasts.

All your data in one place

Pigment has native data connectors including Salesforce, HubSpot, NetSuite, and data warehouses. The flexibility of such integrations makes the platform a great central location for consolidating your data and model forecasts. You can import historical data and build your forecast, making it much easier for sales and finance teams to make decisions on a shared data source.

Real-time reports on shared data

On top of shared data, you can use Pigment to build visually appealing and easy-to-interpret reports. Teams’ goals will be better aligned when they look at the same report. Finance can share the previous year’s projections and actuals. The icing is that all this data is real time, not a 12-hour or 6-hour sync between sources!

What-if scenarios

Given the volatile economy, sales forecasts tend to be less accurate and require frequent reforecasts. Scenario planning is a must-have for companies that want to assess all possibilities. Create what-if scenarios to glimpse the future based on the values you enter. What-if scenarios will help the Finance team prepare the sales team for eventualities and make decisions without contention.

An intuitive planning platform that fosters collaboration

Pigment acts as a single repository for shared data, models and forecasts, scenarios, and visualizations. It also features collaborative features such as comments and tagging, maximizing the potential for cross-functional alignment. With Pigment, you can overwrite quota assumptions, comment on the latest figures, and tag your teammates to start live conversations.

Transition data from models to slides‍

Sales and finance leaders can work together to empower better decision-making. Presentations play a key role in delivering insights to executive leadership, where Pigment's Google Sheets connector helps automatically update slides with the latest data in one click.

Sales forecasting has increased drastically in complexity due to shifting economic trends. When Sales and Finance work together, these teams can feed off the knowledge stored between them to deliver more accurate forecasts, leading to efficiency in meeting company goals.