This chapter contains the following:
Forecasting future sales provides predictions of future revenue for specific time periods. Management uses forecasts to set production schedules and volumes, to determine resource requirements, and to report financial guidance to investors.
The key features of sales forecasting include the following:
Salespeople can view, manage, and submit their forecasts from the simplified UI, in addition to the desktop UI and mobile application. Specifically, salespeople can:
Review their forecasted product items and submit the forecast.
View their unforecasted pipeline.
Use embedded analytics to improve forecast accuracy.
You can view current, future, and past forecasts. The current forecast is open for editing at certain times and then frozen.
Using simple pages, sales managers can review and adjust their forecasts wherever they are. These easy-to-use pages enable sales managers to view the latest forecasting data and compare it to key metrics such as pipeline and won revenue.
Sales managers can quickly see which salespeople have submitted their forecasts, what has changed since the previous forecast, and the opportunities that comprise the forecast. Sales managers can also drill into their subordinates' forecasts to view a forecast the same way that the salesperson sees it. This provides sales managers with the opportunity for more effective coaching and greater forecast accuracy.
Sales managers can add, remove, or adjust individual lines in a salesperson's forecast, segment the totals by time period, and override forecast totals for each salesperson. Any adjustments are clearly identified throughout the forecast hierarchy, allowing management to quickly view the changes made by sales managers on their team.
Forecasting reflects any edits made to an opportunity, or any adjustments made at the deal level in real time.
You forecast sales by territory. The forecasts roll up following the territory hierarchy. Changes to the active territory hierarchy are periodically synchronized with the forecast hierarchy up until a freeze date. After the territory freeze date, salespeople can make changes to their forecasts.
You can record overlay forecasts on opportunity revenue transactions in addition to the revenue sales credit split. Overlay forecasts allow nonprimary salespeople to forecast sales expectations for all overlay sales credits.
You can make adjustments to the leaf product. When you save, forecasting recalculates the parent products and your overall forecast number. Adjustments are only visible up the management chain.
The sales administrator predefines the schedule of forecast periods.
The forecast for a period is automatically generated from eligible opportunity product items scheduled to close within the period. Forecasts are refreshed from the pipeline revenue in real time. Opportunities and forecast items continue to synchronize until the salesperson submits forecast items for final approval.
The sales administrator sets the criteria that determine whether a product item is eligible to be automatically included in a forecast.
The sales administrator provides the option for salespeople to override the established criteria and manually include or exclude a product item from the forecast.
If the administrator enables product aggregates, then the simplified UI shows the product totals of all forecasted opportunities. The product aggregates can be shown for the quarterly forecast total, or they can be broken down by the months within that quarter. The depth of the product hierarchy within forecasting can be set by the administrator to 1, 2, or 3 levels deep.
A sales forecast for a territory encompasses a time period and sales opportunities that meet defined criteria. Salespeople submit their forecasts to their managers, who make any needed changes and in turn submit the forecasts to their managers.
The following figure shows the components for a territory forecast. Product items from opportunities form the original forecast. If the product item has multiple sales credits, then the product item is visible across multiple forecasts. Salespeople add adjustments to the forecast. Adjustments can be applied at a summary or item level.
The forecast territory must be correctly assigned for the product item to appear in the correct forecast.
A product item from an opportunity must have a designated close date that falls within the forecast period to be included in the forecast.
The criteria for the product item must match the criteria set for the forecast. For example, if the forecast criteria specify a win probability of greater than 75 percent, then a product item with a win probability of 80 percent is added to the forecast.
If the ability to override is enabled, then a salesperson can include a product item in the forecast even though it does not match the criteria, or exclude a product item that matches the criteria.
It is possible for managers to pull in forecast items as adjustments that do not match the close date or criteria and override conditions.
The original forecast is the total of all product items that match the forecast criteria or that are included by overrides. All product items must have close dates within the forecast period.
Salespeople can add a positive or negative adjustment on top of the original forecast to form an adjusted forecast.
Managers and overlay credit recipients can pull in forecast items as adjustments that do not match the close date or criteria and override conditions. Also, managers and overlay credit recipients can drop items as adjustments, regardless of close date or match and override conditions.
Metrics provide calculated measures based on historical or current transactional data. Salespeople can refer to metrics when making forecasting decisions. Your administrator enables one or more metrics. Disabling a metric hides the metric from the user interface and speeds up the execution time for certain background processes.
The following table shows the available metrics and how they are calculated:
Best Case Forecast
The best case forecast metric is the sum of all best case revenue values for all forecast items in the forecast period. You can enter the best case revenue amount when you change the product line details in an opportunity.
The closed revenue metric is actual revenue for the target territory that was closed during the forecast period.
The estimated adjustment metric is the sum of the difference between estimated revenue and revenue for all transactions in the forecast period. Sales Predictor uses statistical analysis to provide the estimated revenue amounts based on historical sales for the product.
The expected forecast metric is the sum of all weighted revenue values for all forecast items in the forecast period. Weighted revenue is the revenue amount multiplied by the probability of the deal closing
Likelihood to Buy Product
The likelihood to buy product metric reflects the percentage of confidence that a deal will close with the specified revenue on the specified close date. Sales prediction uses statistical analysis to provide the likelihood to buy product based on historical sales for the product associated to the revenue item.
The pipeline metric is the total revenue amount of all product items where the Status category is Open, the primary territory is the target territory, and the close date lies in the forecast period. Unforecasted pipeline is the total revenue amount of all product items without a corresponding forecast item, where the status category is Open, the primary territory is the target territory, and the close date lies in the forecast period.
The quota metric is the revenue target associated with the expected performance of a salesperson's territory for a given forecast period.
Worst Case Forecast
The worst case forecast metric is the sum of all worst case revenue values for all forecast items in the forecast period. You can enter the worst case revenue amount when you change the product details in an opportunity.
An adjustment is a positive or negative number that adjusts your own or a subordinate's unadjusted forecast up or down.
The adjusted best case forecast is the sum of:
The best case for all forecasted items
Item-level adjustments for the best case
Any summary level adjustment to best case
The adjusted worst case forecast is the sum of:
The worst case values for all forecasted items
Item-level adjustments for worst case
Any summary level adjustment to worst case
The estimated adjustment metric is the sum of the difference between estimated revenue and revenue for all transactions in the forecast period. Sales Predictor uses statistical analysis to provide the estimated revenue amounts based on historical sales for the product associated to the revenue item.
You enter summary level adjustments by selecting Adjust from the Actions menu.
If you forecast by product, by product and channel, or by product, channel and time, then your administrator enables the Forecast Summary tab that provides different views for making detailed adjustments, and the adjust action is no longer available.
In the Forecast Summary tab, whenever a parent product has children, an additional child is added called Unallocated. A deal that is for the parent itself appears as unallocated until you can determine to which child to move the deal. When you make an adjustment to the parent the adjustment amount appears in the Unallocated child row until you distribute it among the children.
You can manually alter the children until the unallocated amount reaches zero. If you over-allocate without reaching zero, then the unallocated amount can become negative.
Use the Distribute to Children action to divide the amount up proportionately amongst the children based on the percentage that each child makes up the parent adjusted forecast. If all children are zero, then the amount is divided equally.
Recalculate from Children changes the selected row so that the value is equal to the sum of the value for the children, and the unallocated amount is zero.
Start your forecast adjustments at the product level and if required then spread your adjustments across product and time. When you start at the summary level, by product, then your adjustments appear as unallocated amounts for time as well as for lower levels of the product hierarchy. You then need to divide the unallocated amounts down the product hierarchy and among the dimensions for time.
You can choose to forecast only by product, or by product and time.
To add forecast items to a forecast, search for product lines in your territory and add them to the forecast. For any forecast item with a warning icon, you must change any attributes that don't meet the forecast criteria. When all attributes fall within the forecast criteria, the product item becomes part of your forecast.
You can also use a forecast override if the administrator enabled it for your territory. You can set the Forecast Option to Always to override the lack of matching forecast criteria. An icon warns you when a revenue item doesn't match the forecast criteria and requires the forecast override.
If you are unable to edit the forecast item you are adding, then the item is added with the unadjusted forecast amount set to zero. However, the item now has a positive adjustment amount to match the original revenue item revenue amount. For example, if the revenue amount is 3,000, then the unadjusted forecast is 0, the forecast adjustment is 3,000, and the adjusted forecast is 3,000. You can further refine the adjusted forecast item amount, or remove the forecast item if you no longer want the item included in the forecast.
Select the forecast item and click the remove icon. For any product item with a warning icon, you must change any attributes so that the revenue item doesn't meet the forecast criteria or so that the forecast item no longer closes within the forecasting period.
You can also use a forecast override if the administrator enabled it for your territory. You can set the Forecast Option to Never to override the matching forecast criteria. An icon warns you when a revenue item matches the forecast criteria and requires the forecast override.
If you are unable to either change the forecast criteria for the item or use the override, the item disappears from your forecast items list, but the unadjusted forecast amounts remain the same. However, the item now has negative adjustment amounts to match the unadjusted forecast amounts. For example, if the unadjusted forecast amount is 3,000, then the forecast adjustment is negative 3,000 and the adjusted forecast is 0. With the removed forecast item selected, you can add it back in if you want to include the item back in the forecast.
If your currency is different from the corporate currency, then select the desired currency. The default selection is your preferred currency. In addition to seeing information in your currency, you will also see some information in the corporate currency. Forecast item detail transaction information remains in the transaction currency.
You can submit your forecast after the territory freeze date and before the forecast due date. Make all of your item and summary forecast adjustments. You can submit your child territory forecasts on behalf of your subordinates and then make adjustments to your forecast before submitting.
You can't make adjustments or update your forecast after you submit it. Your manager can make adjustments to your forecast only after your submission. You can use the Withdraw option in the Actions menu to withdraw your submission, unless your manager changed or adjusted your forecast or submitted the manager's forecast. If your manager rejects your forecast, you can make further changes to the rejected forecast and then resubmit it.
When you view the territory forecast by product in the Forecast Summary tab, you can select to filter by adjusted forecast. The table then displays products within the selected territory definition that have either an adjusted forecast value or an adjustment value that is not zero.
The territory is hidden in the Forecasting Overview page, but is available on the Edit Forecast page. The owner of the parent territory can submit the forecast for the child territory. If the child territory owner also owns the parent territory, then the territory owner can edit forecast items, add and remove forecast items as adjustments, and adjust the territory forecast.
The unallocated amount for a parent is added to the amounts for all the children so that the unallocated is zero.
The unallocated amount is divided up proportionately amongst the children based on the percentage each child makes up the parent adjusted forecast. If all children are zero, then the amount is divided equally.
The unallocated amount at the child level must be zero for adjustments to be added directly to the parent total. Child level adjustments are added to or subtracted from the unallocated amount until unallocated is exactly zero.