3 Steps for Professional Services Companies to Improve Revenue Forecasting

CRM platforms like Salesforce make it easy to track deals and your sales pipeline. But in the professional services world,

3 min. read

CRM platforms like Salesforce make it easy to track deals and your sales pipeline. But in the professional services world, selling is only a piece of the revenue puzzle. Once your team sells a project, after all, multiple variables and events can affect your revenue in positive or negative ways:

  • Amendments and addendums to the original project scope
  • Projects that end either under or over the amount of scoped hours
  • Write-offs for hours worked on a project

On top of that, the professional services world contains countless ways to bill a project. A project could involve invoicing terms as varied as an up-front fixed bid, time & materials rates, fixed weekly billing and more. And under each of these terms, the above project complications could all mean different things for your revenue.

So if your company estimates revenue from deals sold, your revenue forecasting efforts could prove wildly inaccurate.

That’s why professional services companies need to move beyond deals and opportunities in their CRM and use their platform to develop revenue forecasting based on hours instead. It seems a convoluted task at first, but by breaking the work into these 3 steps, your team can establish a roadmap to a better understanding of revenue and your projections.

3 Steps for More Accurate Revenue Forecasting in Professional Services

1. Start logging time in your CRM.

As any professional services employee knows, time is literally money in their world. So the first critical step involves tracking logged and projected hours in your CRM. Because logged hours help you calculate recognized revenue, while projected hours should tie out to future income.

For companies using Salesforce, we recommend checking out Precursive and Cloud Coach. Not only do these tools both offer visual and scalable time-tracking and scheduling capabilities, but they also encompass them into broader project management platforms. Their technologies allow for easy comparisons of project and deal, to help you judge whether your teams are completing work within their budgets.

And of course, any useful revenue projection relies on accurate hour logging, both by project managers to plan out upcoming weeks and by individual resources to record their time. Garbage in equals garbage out, after all.

2. Standardize your project terms (as much as possible).

Once your team is faithfully logging hours in your CRM, you’re ready to calculate revenue from them, at least from a technology perspective. As we mentioned above, however, the more complicated and varied your invoicing terms are, the more challenging the next step will be.

Although clients typically have their own preferred terms, it pays to consolidate your invoicing options into a few standardized processes. Remember: You can only successfully build technology to follow well-defined requirements. Consistent ad-hoc billing and one-offs are surefire ways to destroy even the best-laid revenue forecasting technology.

3. Invest in a solution that calculates revenue from hours.

At this point, all that’s left to do is to generate a Salesforce report that calculates revenue from your logged and projected hours. Sounds simple, right?

Well, that depends on point #2. If you bill every one of your projects on a consistent time and materials basis, then the calculation is straightforward. But the more invoicing terms you have, the more complicated your solution becomes.

Both of the Salesforce solutions for project management mentioned above also include revenue forecasting capabilities. But, depending on the complexity of your needs, you may require a custom-coded solution. Here, we recommend mapping out each of your invoicing methods and asking yourself: “How can we calculate revenue for this type of project based on our CRM data?” The best solution will include business logic to calculate every project correctly based on these criteria.

Developing accurate revenue forecasting in Salesforce requires a significant amount of foresight, planning and effort from both a technology and process perspective in your company. The results are ultimately worth it, though. How do we know? We’ve built this exact type of solution in our CRM. So if you have questions, give us a call — we can help you along the way and keep you from reinventing the wheel.