Forecasting is an effective, important and necessary aid to
planning and planning is the basis of effective business
operations.
Forecasting is essential to study the broad parameters of the
market and make marketing plans, the budget for the marketing plans
by forecasting actual financial, cash flows, inflows and outflows
based on external factors and past data analysis.
The different type of business forecasts are as follows:
- Market forecast: They examine the business at large and study
the market at a macro level and the impact it will make on their
business. This will help accurately plan sales and preempt future
trends. For example, Google home forecast on Amazon Echo to study
and meet market demands.
- Sales forecast: It’s a micro level of planning based on past
sales and expected future demand depending on the sales plan. The
sales plan is also the base for planning the finances, budgets, and
cash flows. It allows preplanning adjustment in production or new
production planning, inventory planning and raw material sourcing.
for example if a number of walking increase in a QSR they will plan
additional staff and equipment to match the growing demand.
- New product forecast: Planned innovate existing and new
products to meet competition and challenges example is frequent
launch of smartphones with new features.
- Potential forecast: The need to arrive at the current potential
in sales forecast and market forecast will determine the market
readiness of your organization and how lean and agile they are to
changing potential and meeting market demands.
- Budget Forecast: The sales and market forecast will be the base
of making your budget, extra working capital requirement, arrange
for funds and plan cash flows accordingly.
The organizations make a qualitative and quantitative analysis
to accurately forecast the market, sales, plan budget etc. The
methods use past data, competitor information, surveys, customer
feedback and expected market trends to make accurate and effective
forecasts.