Revenue forecasting, how it is calculated

VOGSY provides multiple perspectives on (future) revenue through different views:

• Chart 'Revenue forecast'

• Report 'Revenue actual and forecast'

• Report 'Weekly revenue forecast for confirmed projects'

This article explains how the revenue forecast is calculated for each of these charts and reports, ensuring you have a clear understanding of how it is calculated.

1. Pipeline

   Represents revenue based on opportunities in the sales funnel. These are pending deals, often weighted by their probability of closing.

2. Unplanned orderbook

   This is the revenue value of work that is confirmed but has not yet been allocated to specific resources or planned in detail.

3. Planned orderbook

   Represents revenue value for work that is scheduled and assigned to resources.

4. Actual

   This is the value of work that has already been completed (hours logged).

To illustrate how revenue forecasts are calculated, we’ll examine various scenarios:

Revenue is calculated as the sum of recurring revenue and opportunity revenue. Monthly revenue is determined based on the number of days in each month that fall within the future project's timeline (expected start date and expected finish date). VOGSY will apply a weighted revenue based on the opportunity's actual sales probability. The revenue will show as ‘Pipeline’ in the revenue forecast.

Example:

• Revenue opportunity: 100.000

• Recurring revenue: 50.000

• Sales probability: 50%

• Weighted revenue: 75.000

• Expected start date: 1 January

• Expected finish date: 31 March

The revenue will be reported over the expected start date to the expected finish date assigned to the opportunity:

• Revenue forecast (Pipeline)

  • January 2025 (31 days): 25.833

  • February 2025: (28 days): 23.333

  • March 2025: (31 days): 25.833

When an opportunity is linked to an associated project, the revenue forecast is based on the order value of the deliverables, overriding the opportunity's expected start and finish dates. However, the sales probability is still applied. Apart from this, the monthly revenue forecast is calculated similarly to what is described in scenario 1, and the revenue will show as ‘Pipeline’ in the revenue forecast.

When work begins on a project that is still linked to a pending opportunity (not yet confirmed), it is reflected in the revenue forecast as both actual revenue (Work at risk) and revenue forecast. The remaining project value is shown as a weighted revenue forecast in the section ‘Pipeline’. The period of this revenue forecast is determined by the timelines of the deliverables (similar to what is described in scenario 2).

Example:

• Revenue opportunity: 100.000

• Recurring revenue: 50.000

• Sales probability: 50%

• WAR (based on hours approved): 7.500

• Weighted revenue Pipeline (150.000 - WAR): 142.400 x 50% = 71.250

• Expected start date: 1 January

• Expected finish date: 31 March

Revenue forecast shows:

• Actual revenue (WAR): 7.500 reported over the months where the hours were spent

• Revenue forecast (Pipeline): 71.250

  • January (31 days): 24.541,67

  • February (28 days): 22.166,67

  • March (31 days): 24.541,67

The revenue is determined by the order value of deliverables. Although the project is confirmed, no resources have been allocated to it yet. As a result, the revenue will be recorded under the "Unplanned order book."

Example:

• Order value deliverable: 75.000

• Start date deliverable: 1 January

• Finish date deliverable: 31 March

The revenue is reported over the period of the deliverable using the start and finish dates in the section 'Unplanned order book':

• January (31 days): 25.833

• February: (28 days): 23.333

• March : (31 days): 25.833

This confirmed project has some resources allocated, but not all calculated hours are assigned to specific resources.

Example:

• Order value of the deliverable: 75.000

• Breakdown of calculated hours (75.000):

  • Activity 1: 200 hours x 125/hour = 25.000

  • Activity 2: 300 hours x 150/hour = 45.000

• Value of allocated hours (42.500):

  • Activity 1: 100 hours x 125/hour = 12.500

  • Activity 2: 200 hours x 150/hour = 30.000

Revenue forecast shows:

• Planned order book: 42.500

  • This reflects the allocated hours.

  • The period is based on the month of the planned hours.

• Unplanned order book: 32.500 (75.000 - 42.500)

  • This reflects the unallocated portion.

  • The period is determined by the start and finish dates of the deliverable for the unplanned activities.

Revenue is calculated based on the order value of deliverables. For projects with allocated resources, VOGSY incorporates the value of planned hours into the Planned Orderbook section of the Revenue Forecast. This value is determined by multiplying the number of planned hours by the sales rate. The date of the planned hour determines the month in which the revenue is reported.

Any difference (delta) between the value of the planned hours and the deliverable's order value is added to the Unplanned Orderbook.

Example:

• Order value deliverable 75.000

• Planned orderbook: 70.000:

  • Planned hours ‘Activity 1’: 200 hours x 125/hour = 25.000

  • Planned hours ‘Activity 2’: 300 hours x 150/hour = 45.000

• Unplanned orderbook: 75.000 - 70.000 = 5.000

A common scenario involves an ongoing project with tracked time for one or more activities, planned hours, and unallocated or unplanned remaining hours.

In this scenario, the revenue forecast is broken down into three components:

• Actual revenue: Revenue from hours already worked.

• Planned orderbook: Revenue based on hours planned for future weeks.

• Unplanned orderbook: Revenue potential for unplanned hours yet to be scheduled.

Example:

• Order value deliverable 70.000

• Calculation:

  • ‘Activity 1’: 200 hours x 125/hour = 25.000

  • ‘Activity 2’: 300 hours x 150/hour = 45.000

• Time tracked (15.000): Actual revenue

  • ‘Activity 1’: 40 hours x 125/hour = 5.000

  • ‘Activity 2’: 100 hours x 150/hour = 10.000

• Hours planned in future weeks (42.500): Planned orderbook

  • ‘Activity 1’: 160 hours x 125/hour = 20.000

  • ‘Activity 2’: 150 hours x 150/hour = 22.500

• Hours to plan: (7.500) Unplanned orderbook
  Hours calculated - Hours spent - hours planned

  • Activity 1: 200 hours (calculated) - 40 hours (spent) - 160 hours (planned) = 0 hours

  • Activity 2: 300 hours (calculated) - 100 hours (spent) - 150 hours (planned) = 50
    50 hours x 150/hour = 7.500

The months of revenue are determined as follows:

• Actual revenue is tracked by the date of the time entry;

• Unplanned orderbook is based on the start and finish dates of the deliverable (see scenario 4);

• Planned orderbook is based on the dates of the planned hours.