Can you solve this riddle? An Account Executive submits five deals as "Commit," confidently assuring the CFO of their closure. The CFO, skeptical, disagrees. Months later, the AE claims all five deals closed as predicted, while the CFO asserts that only two did. Remarkably, they're both right.
Exploring the 'Commit' commitment of deals
In sales, 'commit' often signals deals that are nearly guaranteed to close within a certain timeframe, typically the fiscal quarter. However, misunderstandings arise when different departments have varying interpretations of the same term.
Here's the breakdown:
- Sales Perspective: The AE, focused on the eventual closure of deals, views 'commit' as a longer-term promise. This aligns with statistics showing over 90% of 'Commit' deals close eventually, justifying the AE's broader view.
- Finance Perspective: The CFO, tasked with fiscal accuracy and timely revenue recognition, expects 'Commit' deals to close within the specified quarter, backed by the fact that only about 55% of such deals close within the initial timeframe.
Key Takeaways for aligning Sales and Finance
- Clear Definitions: Establish company-wide definitions for forecasting terms like 'Commit.' This ensures everyone operates with the same expectations.
- Frequent Updates: Implement regular update meetings between sales and finance to track the progress of 'Commit' deals, allowing adjustments to forecasts based on real-time data.
- Flexible Forecasting: Adopt forecasting methods that accommodate variations in deal closure timelines, acknowledging that not all committed deals close within the expected quarter.
- Cross-Departmental Training: Encourage ongoing education and communication between departments to foster understanding and reduce discrepancies in deal closure perceptions.
Case solved.
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