Revenue Forecast Configuration > Forecast Methods

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 revenue forecast methods are part of the revenue forecast configuration process which happens in the settings module > finance > revenue forecast methods. Configuration is usually managed by a system administrator or finance.

WHICH METHOD?

You assign the forecast method depending on how your agency wants to forecast future revenue.

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To illustrate how the forecast methods are calculated, we’ll use the following example for our approved price quote in all method calculations below.

Example Approved Price Quote

The approved price quote has a value of $100,000, of this $40,000 is estimated purchases, meaning that the total net revenue forecast will be $60,000.

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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.

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.

For example:-

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.

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:

The figures: Month 2 (January)
Revenue recognised to date = $5,500

Remaining total net revenue = $54,500 [$60,000 - $5,500]

Even distribution of total net revenue = $13,625 per month [$54,500/4 (months remaining)]

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.

For example:-

In the example above, the billing plan dictates that 25% ($25,000) of the price quote will be invoiced each month from January until April which equals the price quote total of $100,000. However, the price quote has $40,000 of estimated purchases, therefore the net revenue forecast takes that into account and removes the cost of sales so the net revenue total is $60,000.

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.

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

Remaining total net revenue = $54,500 [$60,000-$5,500]

Forecast of total net revenue = $13,625 per month [25% x $54,500]

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.

The percentage level of effort (number of hours scheduled) can differ per month for the lifetime of the job.

WorkBook uses these percentages to calculate the net revenue forecast.

For example:-

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

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)

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

Remaining total net revenue = $54,500 [$60,000-$5,500]

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)]

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)

EAC DISTRIBUTION

EAC (estimate at completion) distribution is similar to the proportionately future schedule amount method, however the forecast calculation is more complex.

This method looks at the cumulative percentage complete. This is calculated by adding all the actuals (revenue recognised to date) to the schedule value of the current forecast month. It will then correct any over or under recognition from the previous forecast month.

Future months are then weighted according to schedule weighting.

Let’s take a look at the EAC distribution method in practice. In this example, we will start with month 2 (January), as there was revenue recognised on the job in month 1 (total actuals).

The figures: Month 2 (January)
Price quote net revenue = $60,000
Previously recognised revenue to date (total actuals) = $5,500

Scheduled value month 2 = $16,300

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)

The figures: Month 3 (February)
Price quote net revenue = $60,000
Previously recognised revenue to date (total actuals) = $5,500

Scheduled value month 3 = $12,000

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)

This pattern continues per month until the last forecast month.

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.

For example:-

The figures: Month 2 (January)
50 hours of effort is scheduled in January equating to 27.16% or $16,300*

Forecast values calculation: Month 2 (January)
Month 2 = (value of scheduled work - month 2)
Month 2 (January) = $16,300

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