Now You See (Some of) It

ShoreTel CFO and senior vice president Mike Healy vividly recalls the one time in his four years with the company when it missed its quarterly revenue forecast. "It wasn't a big miss," says Healy, "however our stock went from $13 to $6 in one day."

The fact that it

The fact that it was the last month of 2007 didn't help, however Healy says a major contributing factor was a lack of visibility. Not that the company couldn't see into its sales pipeline: it knew what its at the time-400 channel partners were doing in terms of selling ShoreTel's VoIP (Voice over Internet Protocol) products. The problem was what it couldn't see. The company hadn't realized that it hadn't recruited enough new partners to "pick up the [revenue] slack" in the quarter's final month.

These days, a CFO's ability to get nearly-real-time feedback on leads going in one end of the pipeline and wins coming out the other is, according to Mark Thompson, consumer research practice leader for The Brenner Group, "table stakes." The tools that enable visibility "are not that expensive anymore," Thompson says. "What's key is the skill in matching the tool to a process. In other words the CFO's real job."

Time to ActSo there's a lot of pressure on CFOs to manage revenues if a peek into the pipeline reveals that earnings are trailing. However Forrester Technology principal analyst Andre Pino says CFOs need to go beyond what they see. "If sales historically falls short of its projections," he says, CFOs need to add a factor to the pipeline that will make it reflect the plan more realistically. "One of the advantages of sales force automation is that you can determine when you're off track so you have time to put corrective actions in place to offset a revenue shortfall," says Pino.

The importance of accurately forecasting

Given the importance of accurately forecasting and reporting revenue, it's surprising how many organizations on the whole equate sales pipelines with Excel spreadsheets.

Mike Sullivan, CFO of eIQnetworks, an enterprise security provider, adds his voice to the choir. "The problem with spreadsheets," he says, "is that everyone uses their own format; there's no easy way to collect data, aggregate it, and look at the total.

"Forecasting accuracy was horrible on Excel," Sullivan continues. "In the early part of the quarter, we were closing 5% to 10% of our deals and not getting a lot of detail on who the salespeople were meeting, when they were meeting with them, and the problems that came up." eIQnetworks began utilizing Salesforce.com about two years ago, motivated, says Sullivan, by a desire for "accuracy, more-detailed information, and better visibility."