Revenue and Profitability Guide for CFOs to Navigate Uncertainty

As a Chief Financial Officer, you fully understand the importance of using data to build predictability. Your data-driven approach to your job helps to create accurate and predictable metrics. The rest of your organization can use this information to build a solid understanding of your business’s next steps to succeed.

Uncertainty has always been a part of your job. At Next Quarter, we were built by a former CRO and CFO, so this is a challenge we fully understand. Unfortunately, there is an astonishing amount of uncertainty in the market today. These challenges come from a series of forces that seem to be conspiring to make a CFO’s job more difficult: war, inflation, COVID-19, and political uncertainty, to name a few. Ongoing worldwide turmoil means you must be more innovative to improve account growth, accelerate your pipeline development, and have adequate financial clarity. 

Increased collaboration is the only way your business will navigate this period of uncertainty and survive and thrive. However, this collaboration can only occur if you have the right tools, strategies, and accurate forecasting models. You need to use built for today’s economy, not the 1990s. 

What does this mean? At Next Quarter, we get it: You need to be data-driven in ways that extend well beyond the traditional spreadsheet. You need everyone in the company to use the same information and treat it as a single source of truth. You also need functional revenue forecasting software to help you achieve your revenue goals.

What else does your business need to get through this turbulent moment? Here are five suggestions. 

1. Real-Time Revenue Signals

The chief consideration here is to understand your leading revenue indicators. What drives money in your operation? What can you do to maximize those factors? And how can you do this quickly, accurately, and ensure cooperation with other departments in your business, like Sales? 

Consider your understanding of leading indicators of revenue:

  • Is your pipeline coverage adequate? Do you need higher coverage based on rationalizing win rates and how you invest your dollars? Looking at old data and your historical performance is the best way to get this information. This strategy allows for better incorporation of existing data.
  • Examine your sales velocity. Are you seeing a change in the time to close deals? What is shortening or lengthening these periods? How can you better incorporate data to make more predictable insights about your current sales speeds? 
  • Check out your churn signals. Are any of your renewals at risk? If so, how will these renewals damage your recurring revenue? Are certain renewals more at risk over one time period than others? Can you use this data to develop an early warning for potential problems and adjust accordingly? 
  • Which products in your portfolio are nice to have vs. must-haves for your clients? 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? Answers demand data that is accurate to the second and fully integrated with all company operations. Your finance office must be able to access information from all departments and use the same data as your sales team to conduct the comprehensive financial analysis required to answer this question. 

All of these questions demand that you have accurate and modern financial tools to help you forecast business revenue and access real-time revenue. Does your current software enable you to do this? If not, you should consider updating your financial planning to get more accurate information. 

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. These answers should also help you better understand your revenue and convert data into booked and realized revenue. It should also help you gain the top-level insights you need to convert your sales data into accurate revenue forecasts.

Financial planning and analysis (FP&A) will require frequent collaboration, regular meetings, and appropriate revenue forecasting models to understand the impact of a changing future revenue stream on revenue forecasts. Above all else, you need to increase collaboration to increase the accuracy of your projections. Doing so is critical in many areas, including:

  • Sales guidance and marketing dollar deployment. Increased cooperation and better tools can help you deploy your sales teams most efficiently and effectively.
  • Annual planning and forecasting. Forecasting is the process that determines where you invest your limited revenue dollars. Accurate planning is the only way to get these investment figures correct. 
  • Investor guidance. Nothing will damage a company’s stock price more than inaccurate forecasting, which means you must understand where your revenue comes from. This information cannot be out of date, and you cannot be missing any pieces of data to make this guidance as accurate as possible. 

3. Bi-Weekly Meetings With Finance and Other Departments

Biweekly meetings can allow you to examine short-term pressures and long-term deals with renewal concerns. 

You can also use these meetings to compare your business’s performance against established metrics. For example, are you meeting your goals for revenue growth? Are your revenue predictions accurate, and are your revenue forecast methods providing you with the data you need to invest your money? 

4. Cost Sensitivity Based on Revenue

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

This process can be next-to-impossible without having a full picture of all of your company’s vital data. As a CFO, you know that you need all KPIs at your fingertips in an easy-to-understand and organizable way. You need these figures to be automated and in real-time. You also need historical trends and accurate forecasts to make correct judgments about cost sensitivity. Starting this process can allow you to move people off an account, reducing support time or indirect expenses. 

5. Scenario Planning

The “what if” question is the bane of your existence in finance, but questions that manage uncertainty must be addressed. For example, what if the pandemic roars back? What if your product goes viral and sales explode by 20%? What if global economic considerations cause your growth rate to fall? 

You need to be ready to manage these possibilities, and scenario planning is a type of forecasting that can help you prepare for these contingencies.

Finance teams need to take all the inputs above and be ready to model flexible scenarios based on revenue increases or worldwide “black swan” events. 

At Next Quarter, Our Passion is Your Data

Your finance office has a difficult task: To create an accurate and up-to-date forecast that can guide your entire operation. This operation demands next-level software to assist you in executing a vital responsibility. 

If you are looking to use the latest tools for your forecasting endeavors, Next Quarter can help. We have the most up-to-date and robust financial instruments, including the market’s first AI-based account planning tool. Our financial software is native to Salesforce and can improve types of revenue forecasting by over 97%. 

Want more information on how we can improve your forecasting of revenue and expenses? Contact us today to schedule a demo and learn more about how we can help your business improve its forecasting and make more accurate predictions.