How can you align your invoice forecast with sales forecast?

1 Understand your sales cycle

The first step is to understand your sales cycle, which is the time it takes from generating a lead to closing a deal and sending an invoice. Your sales cycle may vary depending on your industry, product, customer, and sales process. You need to know the average length and stages of your sales cycle, as well as the probability of conversion at each stage. This will help you estimate when you can expect to invoice your customers based on your sales pipeline.

2 Define your invoicing terms

The second step is to define your invoicing terms, which are the conditions and rules that govern how and when you bill your customers. Your invoicing terms may include the payment method, the due date, the late fees, the discounts, and the penalties. You need to communicate your invoicing terms clearly to your customers and ensure that they are consistent with your sales contract and industry standards. This will help you avoid disputes, delays, and errors in your invoicing process.

3 Track your sales and invoice data

The third step is to track your sales and invoice data, which are the records and metrics that reflect your sales performance and invoicing status. Your sales data may include the number, value, and source of your leads, opportunities, and deals. Your invoice data may include the number, value, and date of your issued, paid, and overdue invoices. You need to collect and update your sales and invoice data regularly and store them in a reliable and accessible system. This will help you monitor your sales and invoice trends and patterns.

4 Forecast your sales and invoice revenue

The fourth step is to forecast your sales and invoice revenue, which are the projections and estimates of your future income from your sales and invoicing activities. Your sales revenue forecast is based on your sales pipeline, your conversion rate, and your average deal size. Your invoice revenue forecast is based on your sales revenue forecast, your invoicing terms, and your payment behavior. You need to use a realistic and data-driven approach to forecast your sales and invoice revenue and review them periodically. This will help you plan your cash flow and profitability.

5 Compare and reconcile your forecasts

The fifth step is to compare and reconcile your forecasts, which are the processes of analyzing and adjusting the differences between your sales and invoice revenue forecasts. Your forecasts may differ due to factors such as seasonality, customer churn, sales cycle variation, invoicing errors, or payment delays. You need to identify and quantify the gaps between your forecasts and investigate the root causes. Then, you need to take corrective actions to align your forecasts, such as revising your sales strategy, improving your invoicing system, or negotiating with your customers.

6 Report and communicate your results

The sixth and final step is to report and communicate your results, which are the outcomes and implications of your sales and invoice forecasting and planning. Your results may include the actual versus forecasted sales and invoice revenue, the variance and accuracy of your forecasts, and the impact of your forecasts on your cash flow and profitability. You need to prepare and present your results clearly and concisely to your stakeholders, such as your management, team, or investors. This will help you demonstrate your performance, accountability, and insights.

7 Here’s what else to consider

This is a space to share examples, stories, or insights that don’t fit into any of the previous sections. What else would you like to add?