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Summary
One of the longstanding objectives for business computing has been to ensure that the most up-to-date sales forecasts are reflected in the corporate financial forecast and that as these forecasts change, their implications are used to update that budget. Unfortunately, although there has been some progress, half a century into business computing, Ventana Research finds that most companies have not fully addressed the issue and consequently miss revenue opportunities and fail to achieve the profitability they could.

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One of the consistent failures in the business use of IT over the past 50 years has been the inability to connect sales and marketing with the finance organization. Despite decades of investments in sales force automation, CRM, business intelligence and performance management tools, in most companies it remains difficult to connect the dots between those who are responsible for closing business and those who manage cash flow.

The need is greatest, or course, in corporations with a direct sales force and multiple business lines. But in virtually all companies the problem begins with sales department forecasts, which our benchmark research shows is often inaccurate. That may be because it has been gamed, but also can reflect individual forecast biases or the inability of most systems to factor into forecasts such issues as the predictability of sales of a given product category or the age of an opportunity. This unreliability isn't an issue when business is good. But when sales fall short of plan, management needs a heads-up as soon as possible and needs a way to address the shortfall quickly and effectively. This means having a sales pipeline management system that focuses management attention as early as possible on the most important pending transactions that are at risk.

Many sales forecasting/pipeline analysis tools are available (some companies even have built their own), but few connect to the finance organization to provide those managing cash flow and responsible for providing external guidance (to lenders or shareholders) with a more complete view into the future. Indeed, they don't even always provide sales managers with insight into profitability or product obsolescence so that they can focus their attention on closing the business most important to the company. Often, these sales management systems also lack the sales incentive tools that would make it possible to quickly shift sales attention to these most important sales opportunities.

Information technology can help bridge the gap between sales and finance, and improve sales execution as well, by (1) making sales forecasts more reliable; (2) providing earlier insight into how actual sales is diverging from plan; (3) providing an accurate view identifying the most important sales to focus on in the short term (the ones that are most likely to close, are the most profitable or are strategically important); and (4) having the ability to quickly alter compensation plans to align them with the most up-to date sales opportunities.

Assessment
Many companies have people who see the importance of connecting their sales forecasts with finance. They understand it can enhance profitability, improve customer satisfaction and gain competitive advantage. Unfortunately, this doesn't mean that most organizations take a strategic, enterprise-wide approach to their forecasting and planning activities. Ventana Research believes that to create more accurate and actionable plans, corporations must achieve a tighter integration of their sales and financial plans. In this instance, we recommend that the finance organization take the first step in ensuring that the most up to date sales outlook is automatically reflected in the financial plan.