Deltek Insight 2010: Accurate Revenue Forecasting: Can It Really Be Done?
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VI-241 Accurate Revenue Forecasting: Can It Really Be Done? Presented by: Peter Stein, Fox RPM Corporation
Transcript of Deltek Insight 2010: Accurate Revenue Forecasting: Can It Really Be Done?
VI-241 Accurate Revenue Forecasting: Can It Really Be Done?
Presented by: Peter Stein, Fox RPM Corporation
Why is Forecasting Important?
• Anticipating hiring / resourcing needs
• Anticipate expense reduction / purchasing decisions
• Provide relative future comparison of offices / segments
• Company valuation
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Why Is It So Hard in Prof. Services?
• Nature of the Beast– We don’t sell products; We sell people’s time
– We don’t recognize revenue all at once
– Every deal immediately has a continuous backlog until the project ends
– Most projects are not uniform in their labor requirements
• People, People, People– Sales people over estimate and over project
– Client projects are often delayed
– Managers don’t properly or regularly forecast the labor
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What Data Goes Into a Forecast?
• Committed Resources and Labor– In Deltek Vision this is the PLAN
• Opportunities– Potential projects with a value, a start and an end date
• Leads– Value of lead pipeline
• Other– Potential sales you don’t even know about (short sales-cycle sales)
– Typical difference between labor billings and project lump-sum
– Non-labor revenue
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See the Forest… Not the Trees
• Average of many large-error measurements is very exact– Permits use of monthly smoothing in Plans
– Permits use of weighted forecasting
• Example: Let’s throw darts at a dartboard
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Better Yet… Let’s Look at Projections
• Average Monthly Labor: 353; Std. Dev.: 32 (9%)
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Better Yet… Let’s Look at Projections
• Average Monthly Labor: 875; Std. Dev.: 54 (6%)
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Better Yet… Let’s Look at Projections
• Average Monthly Labor: 1750 ; Std. Dev.: 75 (4%)
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50 Projects
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Better Yet… Let’s Look at Projections
• Average Monthly Labor: 1750 ; Std. Dev.: 75 (4%)
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Committed Labor: Project Plans
Labor Resource Forecast Report
• Use the Labor Resource Forecast Report
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Prospective Labor: Opportunities
• Use Opportunity Forecast Report – with WEIGHTED Opportunities
Opportunity Forecast Report
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Produce a Raw Forecast
• Add the Planned and Opportunity Forecasts • Be Careful Not to Double-Count Projects with Active
Opportunities and Plans
July August Sept. October November
Plans $513,600 $430,848 $294,273 $278,043 $144,070
Opportunities (weighted)
$13,588 $54,065 $74,434 $88,436 $75,116
Total $527,188 $484,913 $368,706 $366,479 $219,186
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Create a “Waterfall Chart”
• Permits tracking of raw forecast histories• Cannot run a forecast from the past (even with Vision!)
January February March April May June July August SeptemberJanuary 586,799$ 456,194$ 422,518$ 351,022$ 335,668$ 256,531$ 109,082$ 98,553$ 121,092$ February 590,384$ 603,851$ 567,408$ 474,374$ 433,221$ 351,233$ 151,526$ 142,149$ 174,049$ March 590,384$ 525,445$ 473,297$ 454,330$ 430,251$ 392,367$ 192,064$ 195,895$ 208,880$ April 590,384$ 525,445$ 560,314$ 547,833$ 607,514$ 518,166$ 341,947$ 319,369$ 238,671$ May 590,384$ 525,445$ 560,314$ 544,136$ 686,017$ 575,076$ 407,097$ 397,379$ 325,679$ June 590,384$ 525,445$ 560,314$ 544,136$ 639,737$ 553,317$ 462,251$ 454,314$ 374,228$ July 590,384$ 525,445$ 560,314$ 544,136$ 639,737$ 563,257$ 527,188$ 484,913$ 368,706$
Column values are monthly “look-ahead”
forecasts
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Calculating the “Other” Forecast
• Using Waterfall Chart, calculate deviation from actual revenue
• From history, generate monthly look ahead deviation chart
April May JuneFebruary 474,374$ 433,221$ 351,233$ March 454,330$ 430,251$ 392,367$ April 547,833$ 607,514$ 518,166$ May 544,136$ 686,017$ 575,076$ June 544,136$ 639,737$ 553,317$ July 544,136$ 639,737$ 563,257$
Months Ahead
April Delta
April % Delta
May Delta
May % Delta
June Delta
June % Delta
1 ($3,697) (1%) ($46,280) (7%) $9,940 2%
2 $89,806 17% $32,223 5% ($11,819) (2%)
3 $69,762 13% $209,486 33% $45,091 8%
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Compute Total Forecast
• Average Monthly Look-Aheads– The “tighter” the deviations (i.e., lower standard deviation);
the better the forecast
• Derives “lead/other” forecast amount
May June July August SeptemberJuly 639,737$ 563,257$ 527,188$ 484,913$ 368,706$
Look-Ahead -2% 7% 18%Total Forecast 516,851$ 521,412$ 449,642$
Months Ahead
April % Delta
May % Delta
June % Delta
Average
1 (1%) (7%) 2% (-2%)
2 17% 5% (2%) 7%
3 13% 33% 8% 18%
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Forecasting Summary
• Determine one’s need for forecasting• Be adamant about Deltek Plan and Opportunity updates• Don’t sweat the details; averaging works in your favor• Get the raw data from Vision reporting (Plans
and Opportunities)
• Develop a Waterfall Chart• Measure past accuracy and incorporate into
future forecasting• More accurate past forecasting provides confidence in
future forecasts
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Call to Action
• Questions? Contact– [email protected]
• Try these related sessions for more information– VI-204 Maximizing Accounting in Vision 6.1
– VI-229 Where Did Our WIP Go?
– VI-237 Tracking Revenue Percent Complete
• Visit the Solutions Pavilion for more information
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