Even today, most service companies report a minimum of 10% difference between quarterly billings forecasts and actual results. [Read the report here: SPI report page 174] If missing forecast targets simply meant a little belt-tightening, it would be easy enough to cope.
Basically, the more things you have out of place in this time period, the more work you have to do in the next to realign your organization to meet the new expectations.But unfortunately, forecasts that are inaccurate can cause tremors throughout an entire company, from angering shareholders to disrupting future project availability and even professional development schedules.
To forecast successfully and consistently is built on a foundation laid across the entire company. Just creating more slack into project proposals is not the answer.
Proper financial forecasting requires the ability to understand where your projects and resources will intersect in the future. This requires the ability to analyze the deployment of company resources over time, and across both current and expected projects.
Once achieved, organizations can become more precise about its allocation of resources, not only by knowing exactly which skillsets will be available for the future, but also skillfully managing personnel transfer from one project to the next.
Reaching success needs more than the desire to achieve milestones faster or cut down on bench time. Service companies must commit themselves to building tighter organizational and technological links between sales, service delivery and the back office.
Why Forecasts and Actual Results Differ
What is expected in the forecasts and what really happens are so far out of sync because service delivery teams and the sales force have no meaningful communication.
In a typical firm, the sales management assigns probabilities to bids and informs project managers of possible future projects. That is if they even have access to these forecasts at all.
Nonetheless the project managers are left to fend for themselves to decide how to reallocate or hire in order to meet the potential contract.
In the same way, delivery teams with limited insight into scheduling and skill availability often give only the vaguest assurances to sales that the professionals are in place to meet the terms of a pending bid. But this approach is unsustainable especially for laggards, as forward-thinking services firms continue to speed forward with on-time and on-budget delivery.
Closing the Forecast-Result Gap
The key to shrinking the forecast-result variance is the company’s commitment and ability to allocate the best available resources to meet client needs on a consistent and contracted basis. Only then can they provide both employees and customers with accurate insights into the future.
What makes all this possible and easy is a Services Resource Planning platform as it allows the company to conduct detailed analysis of each pending deal, each in-progress contract, and each available resource and understand how margins and milestones will be affected by any number of possible decisions, including hiring new staff or reallocating existing professionals to meet another client's key needs.
Proper financial forecasting isn't just a benefit to the back office. Accurate forecasts make it possible to understand the utilization, margin and billings of any project and any professional, over time and cumulatively. This in turn makes your project proposals more reliable and accurate, which raises your chances of making winning bids that deliver as promised. You can also avoid future disasters for your company brought by wrong estimations of project costs.
Moreover, firms that can simplify forecasting create an environment of stronger professional development and higher retention. In short, they become the kind of company shareholders want to own, and top-level talent wants to be part of.
Did you know there are a lot of tools for managing web-based projects that can be set-up in 5 minutes or less? Check out some of our choices on task management, Gantt charts, meeting management, budgeting and much more in the Top 7 Project Management Tools.