The Crux of the Problem

So why is revenue forecasting so difficult? Take the following example, where our sales team is forecasting a sale of £200,000 in three months time (current month+3). The sale consists of product, on-site services and annual maintenance. In this simple example, 30% of the revenue will be deferred.

However, if US GAAP rules are applied, we can easily imagine the following interpretation of the same forecast deal in which a startling 98% of the sale value is deferred!

Now - think of a company with 100 salespeople, all working 10 new deals a month, where the booking date, probability and value are all subject to change on a week-by-week basis. Managing the sales forecast is difficult - predicting revenue is a nightmare.