FORECASTING

Forecasting Worksheet

Forecasting, by its very nature, augments strategic planning.  It is based on past experience and future expectations.  Forecasting can vary in complexity from a simple guess to an exceedingly complicated analysis.  ImperoCo relies on one of two methods when performing a forecast:  the explanatory method and the extrapolation method.

BENEFITS OF FORECASTING

The explanatory method will help your organization understand to what degree certain factors affect forecasts.  Additionally, the extrapolation method will provide a breakdown of the seasonality, trend, cyclicality and noise components of forecasted results.

THE FORECASTING PROCESS

• Pull in historical data from which the forecast is to be generated
• If relying on the explanatory method, then historical data for the appropriate independent variables must also be compiled
• Calculate the forecast
• Review and interpret the output
• Ascertain if any qualitative adjustments need to be made

FURTHER READING

These links elaborate on the topic at hand.  They serve as a good starting point for those companies that would like to learn more or would like to address these topics “in house.”  For those firms that prefer to continue to focus on their current responsibilities and would value the objective viewpoint of a professional from outside of the organization, click here.

DecomposePaper.pdf (application/pdf Object)
Excerpt:  “Often, the financial well-being of the entire business operation may rely on the accuracy of the forecast since such information will likely be used to make interrelated budgetary and operative decisions in areas of personnel management, purchasing, marketing…”

An Overview of Forecasting Methods
Excerpt:  “Forecasts empower people because their use implies that we can modify variables now to alter (or be prepared for) the future. A prediction is an invitation to introduce change into a system.  There are several assumptions about forecasting:” 

Forecasting – Inc.com
Description:  Assortment of articles on forecasting.

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