Forecasting is a technique that uses historical data as inputs to make informed estimates that are predictive in determining the direction of future trends. Businesses utilize forecasting to determine how to allocate their budgets or plan for anticipated expenses for an upcoming period of time. In the simplest terms, forecasting is an attempt to predict future outcomes based on past events and management insight.
Judgement forecasting uses only our intuition and experience. Our minds are able to make connections and understand the context in a way that no computer can. However, we’re also prone to certain biases that make analyzing large amounts of data difficult. Judgment forecasting is best where there is little to no historical data- such as new product launches, competitor actions, or new growth plans.
Quantitative forecasting uses analytics to analyze large amounts of historical data in order to discern trends and patterns. Quantitative forecasting is excellent at churning through large amounts of data and is less prone to bias. However, it is weakest when there is little to no historical data that can be analyzed. Quantitative forecasting relies, more or less, on identifying repeated patterns in your data so it may take a while to see the same pattern repeat more than once. Combining judgment and quantitative forecasting gets the best results.
Forecasting is a decision-making tool which help in budgeting, planning, and estimating future growth. Our forecast experts use various advanced statistical techniques to project you future growth both in terms of demand and revenue.
Why to Choose it
Establishing a New Business:
While setting up a new business, a number of business forecasts are required. One has to forecast the demand for the product, capacity of competitors, expected share in the market, the amount and sources of raising finances, etc
Success in Business:
Success in business, to a great extent, depends upon correct predictions about the future. Systematic forecasting ensures smooth and continuous working of the business. By knowing the future course of events in advance, one could always face the difficulties in a planned manner.
Better Utilization of Resources:
Forecasting ensures better utilization of resources by revealing the areas of weaknesses and providing necessary information about the future. Management can concentrate on critical areas and control more effectively.
Estimating Financial Needs:
Every business needs adequate capital. In the absence of correct estimates of financial requirements, the business may suffer either from inadequate or from excess capital. Forecasting of sales and expenses helps in estimating future financial needs.