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Reconciliation playbook

reconciliation-playbook.md

Reconciliation Playbook: Top-Down vs Bottoms-Up Meeting

Pre-Meeting Preparation (1 week before)

Finance to-do list

By day 1 (5 business days before meeting):

  1. Compile top-down target and rationale

    • What is the revenue target? (e.g. $8.5M)
    • What are the drivers? (e.g. "20% YoY growth = $7.2M base + 5% market expansion + 3% win-rate improvement")
    • Where did this come from? (board guidance, investor expectations, company strategy)
    • Documentation: one-page top-down model with assumptions

  2. Run sensitivity analysis

    • What if growth is 15% instead of 20%? Total = $7.8M
    • What if market expansion is 3% instead of 5%? Total = $8.3M
    • What if win rate improves only 1% instead of 3%? Total = $8.1M
    • This shows Finance is not dogmatic; there is a range of plausible targets

  3. Model financial implications of different scenarios

    • If target is $7.5M: headcount budget required, expense budget, cash impact
    • If target is $8.5M: additional headcount, expense increase, working-capital implication
    • If target is $9.5M: what assumptions must change? Which are unrealistic?

By day 3 (2 business days before meeting):

  1. Circulate bottoms-up numbers to Finance for pre-review
    • Sales has calculated $7.8M bottoms-up
    • Finance reviews: are there obvious errors or omissions?
    • Finance notes any questions to raise in the meeting

Sales/RevOps to-do list

By day 1 (5 business days before meeting):

  1. Finalize bottoms-up forecast

    • All segments locked with assumptions documented
    • Capacity model calculated
    • Named pipeline overlay complete
    • Confidence level assigned per segment

  2. Prepare segment owners to speak to their numbers

    • Each segment owner (New Biz owner, Expansion owner, Renewal owner) prepares 2-3 min narrative
    • Why is this segment forecast what it is? What changed vs last year?
    • What are the key risks to this segment?

  3. Audit pipeline for obvious red flags

    • Is pipeline coverage above 2.5x? If not, flag as risk
    • Are there large deals that are stale or stuck? Call them out
    • Are known customer losses already reflected in renewal forecast?

By day 2 (3 business days before meeting):

  1. Prepare for "what if" scenarios
    • Sales anticipates Finance will ask: "What if we invest in ABM? How much additional pipeline?"
    • Sales prepares 2-3 upside scenarios with assumptions and owners
    • Example: "If we hire 2 AEs in Q1, add $350K capacity, assuming successful ramp"

Meeting Structure (90 minutes total)

Segment: Set the Frame (5 minutes)

Attendees: CFO/Finance lead, VP Sales, VP Customer Success, RevOps lead, one board member if annual planning (optional)

Opening statement (from moderator, typically CFO or CEO):

"We have two independent analyses of what we should produce next year. Revenue gave us bottoms-up. Finance gave us top-down. We are not here to negotiate. We are here to diagnose. Where they converge, we have confidence. Where they diverge, something true is being hidden, and we need to find it. By the end of this meeting, we will have one plan that every part of this company understands and can execute."

Key norms:

  • Data, not politics
  • Questions that improve the plan, not defend positions
  • Scenarios that create options, not excuses

Segment: Bottoms-Up Presentation (20 minutes)

Presenter: VP Sales or RevOps lead

Slide 1: Bottoms-Up Summary (2 min)

Segment              Forecast    % of Total    Confidence
------------------------------------------------------
New Business         $3.2M         38%         MEDIUM
Expansion            $1.8M         21%         HIGH
Renewal              $2.1M         25%         HIGH
Services             $0.9M         11%         MEDIUM
Intercompany         $0.2M         2%          HIGH
------------------------------------------------------
BOTTOMS-UP TOTAL:    $8.2M        100%

Slide 2-4: Segment Deep-Dive (5 min per major segment)

For New Business:

  • "Current pipeline: $4.8M (1.45x coverage of target)"
  • "AE capacity: 6.5 effective FTE at $850K quota = $5.525M theoretical"
  • "Haircut for slippage (36% typical): $4.8M × 64% = $3.072M"
  • "Named deals likely to close: $250K"
  • "Forecast: $3.2M"
  • "Key assumption: Pipeline generation stays at current levels"

For Expansion:

  • "Current expansion ARR: $1.8M"
  • "GRR (gross retention): 92% (down from 94% prior year)"
  • "Net expansion rate: 12%"
  • "Base + expansion: $1.8M × 92% + $1.8M × 12% = $1.66M + $0.216M = $1.876M"
  • "Forecast (conservative): $1.8M"
  • "Key assumption: Success initiatives launch on schedule"

For Renewal:

  • "Current renewal ARR: $2.3M"
  • "GRR: 97%"
  • "At-risk books: $150K (known churn risk)"
  • "Expected save rate: 75%"
  • "Forecast: ($2.3M - $0.15M) × 97% + $0.15M × 75% = $2.1M"
  • "Key assumption: No surprises; saves execute as expected"

Slide 5: Capacity Model Comparison (3 min)

Capacity Model Estimate:       $7.8M
Bottoms-Up Total:              $8.2M
Variance:                       +$0.4M (bottoms-up higher; confidence boost)

Why variance? Bottoms-up includes expansion and renewal (more predictable). Capacity model focuses on new business headcount.

Slide 6: Key Risks (5 min)

  • Pipeline generation is at-risk (coverage of 1.45x is below healthy 3x; implies marketing pipeline-building is insufficient)
  • New Business win rate assumption (38%) is vulnerable to new competitor entering mid-market
  • Expansion assumes success initiatives launch Q1; if delayed to Q2, uplift is at-risk

Segment: Top-Down Presentation (10 minutes)

Presenter: CFO or Finance lead

Slide 1: Top-Down Target and Drivers (3 min)

Target:                        $8.5M
YoY growth expectation:        20% (board guidance)
2025 baseline:                 $7.0M
Implied growth:                +$1.5M

Drivers:
  - Market expansion (5%):     +$0.35M
  - Win-rate improvement (3%): +$0.21M
  - Expansion acceleration:    +$0.5M
  - New product contribution:  +$0.44M
  -------
  Total:                       $8.5M

Slide 2: Sensitivity Analysis (4 min)

If market expansion = 3%:      $8.3M (down $0.2M)
If win-rate improves only 1%:  $8.1M (down $0.4M)
If expansion stays flat:       $7.7M (down $0.8M)
If all three headwinds hit:    $7.5M (downside case)

Slide 3: Financial Modeling (3 min)

  • "At $8.5M, we need 8 FTE AEs (up from 7), +1 SDR (6 total)"
  • "Headcount cost: +$180K annual"
  • "CAC investment if pipeline-generation is constrained: +$120K"
  • "Total impact to expense base: +$300K"
  • "Working capital: +$200K (collections slippage on larger deals)"

Segment: Close the Gap (40 minutes)

Moderator: "We have bottoms-up at $8.2M and top-down at $8.5M. Gap of $0.3M. Revenue, what would need to be true to reach $8.5M?"

Revenue responds with scenario options:

Scenario A: Additional Headcount

  • "If we hire 1 AE in Q1 instead of Q2, additional $150K in Year 1 contribution"
  • "Assumes successful ramp and deal environment remains stable"
  • "Owner: VP Sales"
  • "Dependencies: Hiring must start by March 1"

Scenario B: Expansion Acceleration

  • "If CS team delivers intensified playbook (onboarding + QBR cadence), expansion rate accelerates to 15% instead of 12%"
  • "Additional revenue: $1.8M × 3% = $0.054M"
  • "With improved retention (93% vs 92%), additional $0.036M"
  • "Total uplift from expansion focus: $0.09M"
  • "Owner: VP Customer Success"
  • "Dependencies: CS team staffing must increase (cost: $80K)"

Scenario C: Pipeline Investment

  • "If we allocate $100K to ABM and improve pipeline generation, new business pipeline increases by 20%"
  • "Implies additional $0.96M in pipeline, closing at 38% = $0.365M additional"
  • "But this is Year 2 payoff (pipeline closes in Year 2)"
  • "Year 1 impact: only $0.12M (timing of some deals pulls forward)"
  • "Owner: VP Marketing"
  • "Dependencies: ABM program must launch by February; targets must be qualified"

Finance challenges:

"So Scenario A is $0.15M, Scenario B is $0.09M, Scenario C is $0.12M in Year 1. That's $0.36M total upside. We still have a $0.14M gap to $8.5M. What else can we move?"

Revenue responds:

"The gap of $0.14M is made up by outperformance vs assumption in existing plan. If our win rate is 40% instead of 38%, if pipeline slippage is 32% instead of 36%, if AE productivity improves 2%, we bridge that gap. But that assumes execution, not investment."

Finance responds:

"Understood. So the plan is: Bottoms-up $8.2M + Scenario A (hiring) + Scenario B (CS investment) + Scenario C (ABM) = $8.59M. Close to $8.5M. But Scenario C doesn't deliver until Year 2, so this is really $8.44M in Year 1. CFO accepts that variance and will communicate to board: Year 1 plan $8.44M, Year 2 plan $9M+ (if ABM seeds pipeline). Does Revenue agree?"

Revenue responds:

"Yes, with one condition: If hiring doesn't close (if we can't hire the AE by end of Q1), we reforecast in May, not wait until August. Agree?"

Finance responds:

"Agreed. Hiring is locked as reforecast trigger. If we miss hiring, the plan adjusts down by $0.15M."

Segment: Lock Plan of Record (10 minutes)

Moderator assigns owner responsibilities:

Base Plan (Bottoms-Up):           $8.2M
  Owner: VP Sales (New Biz), VP CS (Expansion/Renewal), VP Services

Scenario A Uplift:                +$0.15M
  Owner: VP Sales (hiring, ramp, retention accountability)
  Trigger if not executed: May reforecast, plan adjusts to $8.35M

Scenario B Uplift:                +$0.09M
  Owner: VP Customer Success (expansion playbook, retention improvement)
  Trigger if not executed: Q2 reforecast after first cohort results

Scenario C (Year 2 focused):      +$0.12M (Year 1) / +$0.36M (Year 2)
  Owner: VP Marketing (ABM launch, pipeline seeding)
  Trigger if not executed: Q3 reforecast for Year 2 planning

PLAN OF RECORD:                   $8.44M (Year 1, realistic)
BOARD NARRATIVE:                  $8.5M (includes optimism on Scenario C Year 1 timing)

Document:

  • Plan of Record locked in shared spreadsheet
  • Scenario owners assigned
  • Reforecast triggers defined
  • Board narrative prepared (board sees $8.5M as target; internal understands $8.44M is base expectation)

Segment: Next Steps and Cadence (5 minutes)

Moderator:

"Here is how we operate on this plan for the next 12 months:

  • Monthly forecast review: Revenue + FP&A sync every 2nd Monday. Takes 30 minutes. Is the plan on track? Any new signals?
  • Quarterly reforecast: Full analysis like today, but quicker. Revenue present updated numbers. FP&A model financials. Decide if plan stays locked or adjusts.
  • Reforecast triggers: If hiring slips (Scenario A), if CS playbook fails to improve retention (Scenario B), or if pipeline coverage drops below 2.5x, we reforecast within 5 days, not wait for quarter-end.
  • Board comms: CEO presents monthly progression against $8.5M target. No surprise gaps. Any variance gets explained in the meeting.

CFO, you own the board conversation. Revenue, you own the team execution. Questions?"

Conflict Resolution Protocols

Scenario: Revenue says bottoms-up is $7.8M, Finance says top-down is $9.2M. Gap of $1.4M.

Red flag: Gap this large indicates fundamental disagreement on capability or market opportunity.

Diagnostic questions Finance asks:

  1. "Revenue, are you confident in your pipeline assessment? Would you be comfortable betting your next two quarters commission on hitting $7.8M?"

    • If NO: The forecast is too pessimistic or risk-averse. Revenue is sandbagging.
    • If YES: Revenue is confident. The gap is real.

  2. "Finance, where is the $1.4M coming from? Is it a new market, new product, new motion, or is it uplift on existing business?"

    • If new market/product: Can we validate addressable market independently?
    • If new motion: Is that motion proven at scale in our company?
    • If uplift: What specific assumption changes to drive 20%+ growth?

Typical resolution: Ask for two things

  1. Market research: If Finance believes market opportunity is bigger, bring evidence. Customer research, TAM analysis, win/loss data from competitors. "What are competitors closing? What is the market actually buying?"

  2. Pilot or proof point: If Finance believes new motion or segment will work, pilot it. Allocate one AE to dedicated ABM or one team to vertical acceleration. Get 90 days of data. Then scale the assumption based on data, not optimism.

Outcome: Reconcile to a realistic plan with proven assumptions. A gap this large typically resolves to: "Bottoms-up is $7.8M (proven). We have identified $0.5M in validated upside (Scenario A/B). We are piloting $0.3M opportunity (new vertical). Plan of Record is $8.3M, with Year 2 plan at $9M+ pending pilot results."

Scenario: Revenue says "$8M is the max we can do", Finance says "Board needs $9M".

Reframe: This is not a negotiation. It is a resource allocation decision.

Question Revenue asks Finance: "If we need $9M and we can produce $8M from current capacity, what are we not doing? Are we under-investing in pipeline? Are we not pricing correctly? Are we not going after the right customer segment?"

Question Finance asks Revenue: "What would it take to get to $9M? What are the specific steps and costs?"

Potential answers:

  • "Hire 2 AEs (+$200K cost, +$1.2M capacity potential)"
  • "Invest $300K in ABM for named-account motion (+$500K pipeline potential in Year 1, $1M+ in Year 2)"
  • "Raise prices 10% (+$700K revenue if volume stays flat)"
  • "Launch new vertical with dedicated team (+$1M potential but Year 2 payoff)"

Outcome: Choose 2-3 of these. Lock as Scenarios. Commit resources. Accept that one or two will fail and some upside will not materialize. Plan of Record = $8.5M (realistic base + high-confidence scenarios). Board target = $9M. Variance = opportunity to learn.

Do NOT do this: Spread the gap across all teams unilaterally. "Sales, you're $150K short. CS, you're $100K short. Marketing, you're $50K short." This destroys accountability and creates sandbagging.

After the Meeting: Communication and Alignment

Within 24 hours:

  1. Distribute Plan of Record summary (1 page) to all revenue team members

    • What is the plan? (segment by segment)
    • What does it mean for my team? (headcount, territories, targets)
    • What scenarios are we executing? (named investments, named owners)
    • What are the reforecast triggers? (when the plan might change)

  2. Segment owners send tailored comms to their teams

    • New Biz team: "Our target is $3.2M. Here is what that means by account tier, by geography."
    • Expansion team: "Our target is $1.8M. Focus on these customer cohorts and these expansion plays."
    • Renewal team: "Our target is $2.1M. Focus on at-risk books; save rate is our lever."

  3. CFO sends board summary (2 pages)

    • Plan of Record: $8.44M
    • Board target: $8.5M (close)
    • Key upside drivers: ABM, hiring, CS investments
    • Key risks and reforecast windows

By end of Week 1:

  1. Calendar the monthly syncs (every 2nd Monday, 30 min, Revenue + FP&A)
  2. Set the quarterly reforecast dates (last week of each quarter; book 4 hours)
  3. Define dashboard that tracks plan vs actual by segment weekly

Common Mistakes to Avoid

  1. "Running the meeting without the team that has to execute." If you reconcile revenue targets without SDR leaders, AE managers, and CS directors in the room, they will not believe the plan. Include operators.

  2. "Conflating plan (annual) with forecast (quarterly current projection)." The plan is what you committed to at the start of the year. Forecast is what you expect to hit this quarter. They are not the same. Be explicit.

  3. "Creating scenarios but not assigning owners and tracking." A scenario without an owner is a wish. Assign explicit owners. Track monthly. Reforecast if owners slip.

  4. "Spreading stretch across all teams equally." If you need $0.3M in uplift, do not add $50K to 6 teams. Identify 2-3 specific scenarios with specific owners. Accountability becomes clear.

  5. "Negotiating instead of diagnosing." Revenue says $7.8M. Finance says $9.2M. Rather than negotiate to $8.5M as a compromise, diagnose: What are the assumptions in the gap? Are they real or aspirational?