Pipeline Metrics for Finance: What CFOs Need to Know
Pipeline data is the best leading indicator of future revenue. But raw pipeline numbers are meaningless without context. Here's what finance needs to understand.
Finance teams often treat pipeline as a sales concern. That's a mistake. Understanding pipeline dynamics is essential for accurate sales forecasting, expense planning, and board communication. This is a core part of revenue operations.
The Finance Perspective
Pipeline is like inventory for revenue. You need the right amount at the right stages to hit targets. Too little and you miss. Too much at early stages means conversion problems.
Key Pipeline Metrics
| Metric | Formula | Benchmark |
|---|---|---|
| Pipeline Coverage | Total Pipeline ÷ Quota | 3-4x for current quarter |
| Weighted Pipeline | Σ(Deal Value × Probability) | Should approximate forecast |
| Win Rate | Won ÷ (Won + Lost) | 20-30% typical |
| Average Sales Cycle | Avg days from opp to close | 30-90 days SMB, 90-180 enterprise |
| Pipeline Velocity | (Opps × Win Rate × ACV) ÷ Cycle | Revenue per period |
Pipeline Coverage by Stage
Not all pipeline is created equal. $1M in early-stage opportunities is worth less than $500K in late stage.
| Stage | Probability | Coverage Needed |
|---|---|---|
| Discovery | 10-20% | 5-10x |
| Qualification | 30-40% | 2.5-3x |
| Proposal | 50-60% | 1.5-2x |
| Negotiation | 70-80% | 1.2-1.4x |
| Commit | 90%+ | 1x |
Stage Conversion Rates
Understanding stage-to-stage conversion helps identify where deals get stuck.
Example Funnel
- 100 Discovery → 50 Qualification (50% conversion)
- 50 Qualification → 30 Proposal (60% conversion)
- 30 Proposal → 20 Negotiation (67% conversion)
- 20 Negotiation → 15 Closed Won (75% conversion)
- Overall win rate: 15%
Conversion Rate Caution
Historical conversion rates only predict future outcomes if the process hasn't changed. New products, new markets, or new competitors will shift conversion. Use historical rates as a starting point, not gospel.
Using Pipeline for Forecasting
The Finance Approach
- Don't trust rep probabilities blindly: Apply historical conversion rates by stage instead
- Segment by deal size: Large deals have different dynamics than small ones
- Track pipeline age: Deals that have been in stage too long are unlikely to close
- Layer in coverage requirements: If coverage is below 3x, flag the risk early
- Build three forecasts: Rep rollup, historical conversion, and capacity-based
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