What is essential to include in a forecast that hasn’t been converted to sales?

Including unbilled sales orders in a forecast that hasn't been converted to sales is essential because unbilled sales orders represent commitments from customers that are expected to generate revenue in the future. These orders indicate that there is already an agreement in place for services or products, but the billing has not yet been processed. By accounting for these unbilled sales orders in a forecast, a company can have a more accurate predictability of future cash flow and revenue, reflecting the real potential of its sales pipeline prior to formal billing.

In contrast, payments receivable represent amounts that are owed to the company, but they do not reflect future sales potential. Closed sales are transactions that have already been completed, thus they do not affect the forecast for future sales. Sales targets may help in setting goals, but they do not provide concrete data about existing customer commitments or pending conversions into revenue. Hence, unbilled sales orders are critical for making a well-informed sales forecast, as they directly tie to potential future revenue.