Use your CRM Solution as a Forecasting Tool

Start bringing CRM data into your planning and budgeting model

‍Most companies these days use a CRM (customer relations management) software package, primarily in the sales function.  This computerized solution largely replaces the common use of color sticky notes, use of paper notebooks and certainly human memory.  CRM software comes in many flavors, varying levels of complexity, cost and integration options.In its most fundamental form, CRM is completely detached from the ERP or accounting software.  You create contacts and leads in CRM and when a sale is closed you replicate some of the data in your ERP software.  Other packages are integrated into the ERP solution either via a direct interface – the CRM may simply be a module in the ERP software – or through external interfacing, where data entered into the CRM database can be shared and used in the ERP database, hence creating one point of data entry.Regardless of how your CRM software is set up, you are most likely able to generate reports showing you what is in the sales pipeline with estimated closing values, confidence levels and anticipated closing dates for each opportunity tracked in the system.  You also have many options to track your CRM opportunity by customer type, industry, geography, product line and the disposition of each opportunity upon closing (e.g., won, lost, cancelled, etc.).  Then you can further specify the reason why you lost an opportunity (e.g., lost to competitor, price issue, etc.).Much of this data can be used in marketing analysis but also in planning and budgeting.Here is the fundamental data you must maintain:

1. Make sure each opportunity in the pipeline clearly lists the revenue items the sales team is working with the prospects on closing.
2. Ensure there is a value under each revenue item within the opportunity and a total opportunity value. Update this value as the opportunity progresses.
3. For each opportunity enter a confidence level (percent of likelihood of closing). This percentage must be updated as the activities within the opportunity progress.  This value is subjective but should represent the likelihood of closing the sale at the stated value.  The closer you are to closing, the higher this value
4. Each opportunity must have a projected close date. This date must also be updated as salespersons continue to work each opportunity.

All CRM software solutions provide sales pipeline reports where you can see all the data mentioned above.  The report will also provide the projected closed sales value based on close probability (confidence % multiplied by the opportunity potential value).  If you use the projected close date for each opportunity, you can forecast total amount projected to close in any number of future accounting periods.You can arrive at an aged close values schedule that when added to the existing aged backlog will give you a fairly good idea of what the future backlog is going to look like.  If you use specific revenue products and services in the CRM software (always recommended whenever practically possible), you can forecast when specific revenue items will be booked.This entire data set can be used as an important input in your budgeting, forecasting and analysis solution and will drive your revenue model and any periodic re-forecasting.  Your inventory planning can now be done with a greater degree of accuracy and confidence.  Your MRP system, if used, can rely on additional inputs and make recommendations on what material to procure and when that material needs to be brought in. Capacity planning can also take place and various scheduling scenarios can be looked at.Now your CRM software can become an important component in the planning and budgeting array of tools.Alan Hart, MBA, is Principal Consultant at Pacific Shine Group in Portland, Oregon, with responsibility for client business development and hands-on client project implementations. Prior to starting Pacific Shine Group, he worked in various executive accounting and finance positions with technology and growth companies. Notable is his 18 years in the hi-tech manufacturing industry where he served as Controller, Vice President of Finance and CFO of several privately as well as publicly held companies in the Hi-Tech industry, such as Hybrid Arts, Inc., Hamilton Bay Associates and Syncronys Software. In his role in management consulting, Alan has worked in diverse industries and with a variety of clients, including fortune 1000 companies such as Boeing, Delta Airlines, Intel, Wyndham Worldwide and others, as well as many mid-market organizations such as Guitar Center, Ducommun AeroStructures, Cypress Semiconductor, TriQuint Semiconductor and others.Combining his skills and experience in engineering with deep understanding of technical accounting, he is able to assist small and medium-size manufacturing companies establish GAAP compliant accounting and reporting systems.