The CRO and the CFO on forecast

In a lot of services firms, the forecast is a negotiation. The CRO brings a number. The CFO marks it down. The board gets something in between and believes neither of them.

That's a waste of two smart people. The CRO knows the deals. The CFO knows how the business turns bookings into revenue, cash and staffing. A forecast built by both is better than either one alone.

Getting there takes a few agreements that most firms never make out loud.

Why the numbers drift apart

Sales forecasts bookings. Finance forecasts revenue. In a services firm, those are very different things.

A $600K engagement signed in March might produce revenue over nine months, with a slow ramp and a bench problem in month two. The CRO counts it as a win in Q1. The CFO sees a fraction of it in Q1 and worries whether there are people to staff it.

Neither is wrong. They're answering different questions with the same deals. The trouble starts when nobody says that out loud.

Agree on definitions first

Sit down once and agree on the words. What counts as a qualified opportunity? What's a commit? When does a signed statement of work become forecastable revenue, at signature or at kickoff?

Write the definitions on one page. Share them with every seller and everyone in finance. Then hold both teams to them.

Most forecast fights are definition fights in disguise. Settle the definitions and half the arguments disappear.

Build one forecast with two views

The goal isn't one number. It's one set of deals viewed two ways.

The CRO owns the deal-level view. Which opportunities, at what stage, with what probability and close date. The CFO owns the conversion view. When those bookings turn into revenue, what margin they carry and what staffing they need.

Use the same list of deals. If the CFO thinks a deal is weaker than the CRO does, the conversation happens about that deal, by name. Not about a percentage haircut applied to the whole pipeline.

Meet every two weeks

Monthly is too slow. Weekly is too often for finance. Every two weeks works for most services firms.

Keep it to thirty minutes. Walk the deals that changed. Walk the deals that are supposed to close in the next sixty days. Talk about staffing for anything near signature, since a deal the firm can't staff is a deal that will start late.

The CFO should ask hard questions about specific deals. Who signs? What happens if procurement takes six weeks? Has the buyer's budget been approved? A good CRO welcomes that. It's the same scrutiny the buyer's CFO will apply later.

Share the miss honestly

Forecasts miss. When one does, the CRO and CFO should explain it together, to the CEO and the board.

Look at what changed. A deal slipped when the buyer's sponsor left. A practice couldn't staff a start date. The pipeline was thin three months ago and nobody pushed hard enough on first meetings. Name the cause and name the fix.

A CRO who blames finance, or a CFO who blames sales, teaches the whole firm to hide bad news. The forecast gets worse from there.

The fix usually starts further back than the quarter. A good CFO pushes the CRO to look at the front of the funnel. If first meetings dropped this quarter, revenue will drop two or three quarters from now, and finance needs to know before hiring plans lock in.

That shared view of Stage 1 is where the partnership pays off most. The CFO sees the early warning. The CRO gets backing to invest in pipeline before the miss arrives.

The point

The CRO and the CFO should build one forecast from one list of deals, with agreed definitions and two honest views. Meet every two weeks, argue about specific deals and explain misses together.

For more on reporting and forecasting, read why your forecast misses in month two, board reporting on pipeline and stage definitions for services sales.