The forecast method allows you to choose how you want future revenue to be distributed across the months. There can be separate methods for:
Price quotes that sit on non time & materials jobs
Price quotes that sit on time & materials jobs
Pipelines
Setting the net revenue forecast methods are part of the net revenue forecast configuration process which happens in the settings module > finance > net revenue forecast methods. Configuration is usually managed by a system administrator or finance.
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WHICH METHOD?
You assign the forecast method depending on how your agency wants to forecast future revenue.
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Below are the details for each WorkBook net revenue forecast method. Talk a look to work out which method is best for your agency.
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EVEN DISTRIBUTION OVER TIME
Distributes the total remaining net revenue amount evenly among the number of months, from the forecast start date to the job’s end date.
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The figures: Month 1 (December)
Total remaining revenue is $60,000 and there are 5 months remaining on the job - by using the even distribution method, there would be $12,000 forecast for each of the remaining months.
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The figures: Month 2 (January)
Revenue recognised to date = $5,500
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Remaining total net revenue = $54,500 [$60,000 - $5,500]
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Even distribution of total net revenue = $13,625 per month [$54,500/4 (months remaining)]
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| Tip |
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This method of forecasting is a great starting point for agencies that do not use scheduling to plan the job in advance |
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BILLING PLAN
This method of forecasting uses the price quote billing plan to forecast future revenue. It uses the exact amount of net revenue for each month in the billing plan to populate the corresponding months in the net revenue forecast.
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By using the billing plan method, the net revenue forecast ensures that 25% of net revenue will be forecast each month (as per the billing plan) which equals $15,000 per month.
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If we then recognised $5,500 revenue on this job in Month 1 (December) and ran the NRF again in Month 2 (January) this is what would see:
Revenue recognised to date = $5,500
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Remaining total net revenue = $54,500 [$60,000-$5,500]
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Forecast of total net revenue = $13,625 per month [25% x $54,500]
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| Tip |
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This method is good for agencies with very little, to no cost of sales who, recognise revenue based on billings |
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PROPORTIONATELY FUTURE SCHEDULE AMOUNTS
This method calculates the forecast by looking at the total remaining scheduled value and how much has been scheduled across the remaining months.
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The figures: Month 1 (December)
Remaining net revenue = $60,000 (no revenue has been recognised on this job as yet)
40 hours of effort is scheduled in December equating to 16.5% or $9,900*
60 hours of effort is scheduled in January equating to 23.7% or $14,200*
50 hours of effort is scheduled in February equating to 20% or $12,000*
60 hours of effort is scheduled in March equating to 23.5% or $14,100*
40 hours of effort is scheduled in April equating to 16.3% or $9,800*
Scheduled value total = $60,000
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*Total sales value is based on booked resources within the month, according to their hourly sales rate
Forecast values calculation: Month 1 (December)
Month 1 = ([remaining total revenue (price quote net revenue - total actuals)] / [total remaining scheduled (total scheduled - month 1 scheduled)] * schedule value for month 1)
Month 2 = ([remaining total revenue (price quote net revenue - total actuals)] / [total remaining scheduled (total scheduled - month 1 scheduled)] * schedule value for month 2)
Month 3 = ([remaining total revenue (price quote net revenue - total actuals)] / [total remaining scheduled (total scheduled - month 1 scheduled)] * schedule value for month 3)
Month 4 = ([remaining total revenue (price quote net revenue - total actuals)] / [total remaining scheduled (total scheduled - month 1 scheduled)] * schedule value for month 4)
Month 5 = ([remaining total revenue (price quote net revenue - total actuals)] / [total remaining scheduled (total scheduled - month 1 scheduled)] * schedule value for month 5)
December = $9,900 ([60,000/60,000]*9,900)
January = $14,200 ([60,000/60,000]*14,200)
February = $12,000 ([60,000/60,000]*12,000)
March = $14,100 ([60,000/60,000]*14,100)
April = $9,800 ([60,000/60,000]*9,800)
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If we then recognised $5,500 revenue on this job in Month 1 (December) and ran the NRF again in Month 2 (January) this is what we would see:
The figures: Month 2 (January)
Revenue recognised to date = $5,500
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Remaining total net revenue = $54,500 [$60,000-$5,500]
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60 hours of effort is scheduled in January equating to 23.7% or $14,200
50 hours of effort is scheduled in February equating to 20% or $12,000
60 hours of effort is scheduled in March equating to 23.5% or $14,100
40 hours of effort is scheduled in April equating to 16.3% or $9,800
Scheduled value total = $50,100 [schedule value for remaining months (Jan-April)]
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Forecast values calculation: Month 2 (January)
Month 2 = ([remaining total revenue (price quote net revenue - total actuals)] / [total remaining scheduled (total scheduled - month 1 scheduled)] * schedule value for month 2)
Month 3 = ([remaining total revenue (price quote net revenue - total actuals)] / [total remaining scheduled (total scheduled - month 1 scheduled)] * schedule value for month 3)
Month 4 = ([remaining total revenue (price quote net revenue - total actuals)] / [total remaining scheduled (total scheduled - month 1 scheduled)] * schedule value for month 4)
Month 5 = ([remaining total revenue (price quote net revenue - total actuals)] / [total remaining scheduled (total scheduled - month 1 scheduled)] * schedule value for month 5)
January = $15,447 ([54,500/50,100]*14,200)
February = $13,054 ([54,500/50,100*12,000)
March = $15,338 ([54,500/50,100]*14,100)
April = $10,661 ([54,500/50,100]*9,800)
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| Tip |
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This method of forecasting is for agencies who recognise revenue based on WIP, and want a simple calculation to project their future revenue. |
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EAC DISTRIBUTION
EAC (estimate at completion) distribution is similar to the proportionately future schedule amount method, however the forecast calculation is more complex.
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Future months are then weighted according to schedule weighting.
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WorkBook will insert the remaining value into the first forecast month, if there are no scheduled values to calculate the forecast from.
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The figures: Month 2 (January)
Price quote net revenue = $60,000
Previously recognised revenue to date (total actuals) = $5,500
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Scheduled value month 2 = $16,300
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Total remaining schedule value = $50,100 ($60,000 - $9,900 scheduled in month 1)
Percentage complete of price quote net revenue = 39.2%
Forecast values calculation: Month 2 (January)
Month 2 = ([total actuals + scheduled month 2] / [total actuals+ total remaining schedule] * price quote net revenue) – (total actuals)
Month 2 (January) $18,025 = ([$5,500 + $16,300] / [$5,500+ $50,100] * $60,000) – ($5,500)
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The figures: Month 3 (February)
Price quote net revenue = $60,000
Previously recognised revenue to date (total actuals) = $5,500
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There was no revenue recognised in month 2 on this job
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Scheduled value month 3 = $12,000
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Total remaining schedule = $33,800 ($60,000 - $9,900 - $16,300 scheduled values for months 1 & 2)
Percentage complete of price quote net revenue = 44.5%
Forecast values calculation: Month 3 (February)
Month 3 = ([total actuals + scheduled month 3] / [total actuals+ total remaining schedule] * price quote net revenue) – (total actuals)
Month 3 (February) $21,218 = ([$5,500 + $12,000] / [$5,500+ $33,800] * $60,000) – ($5,500)
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This pattern continues per month until the last forecast month.
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| Tip |
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This method of forecasting is for agencies who recognise revenue based upon WIP, and want to correct any over or under recognition in the first available month. |
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SCHEDULE BOOKINGS
The schedule booking method looks only at the value of scheduled time to forecast the revenue. It does not take into account the price quote net revenue.
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The figures: Month 2 (January)
50 hours of effort is scheduled in January equating to 27.16% or $16,300*
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*Total sales value is based on booked resources within the month, according to their hourly sales rate
Forecast values calculation: Month 2 (January)
Month 2 = (value of scheduled work - month 2)
Month 2 (January) = $16,300
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| Tip |
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This method of forecasting is good for agencies who recognise revenue based upon WIP, and want a simple calculation to project their future revenue on predicted time spent. |
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