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Essential Elements of Business Forecasting!
The need for forecasting is apparent from the key role it plays in planning. Forecasting has great use in developing plans. The making of forecasts and their review by managers results in thinking ahead, looking to the future, and making provisions for it. Also the very act of forecasting may disclose areas where necessary control is lacking.
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Forecasting, especially where widely participated by all in the organisation, may help to unify and co-ordinate plans. By focussing attention on the future, it assists in bringing a singleness of purpose to planning.
Elements of Forecasting:
Forecasting helps us to know the future. It also helps us to compare, to estimate
and to analyse the data to arrive at the estimated results. It leads to regular investigation of different aspects of production and management within and outside the organisation. Forecasting prepares a ground to work together and brings better co-ordination, co-operation and control in the organisation.
Under forecasting, future prospects, stability and the discrepancies are properly weighed and studied. This helps the management to remove any hindrances that may come in the way of management.
Thus company results are compared with the estimated ones, the other element which is quite conspicuous with forecasting. Whenever large difference is found, further investigation is undertaken to find out the reasons for such discrepancy.
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Forecasting, therefore, helps to know the expected profits or losses and just by going through certain reports and records of the company, enables the forecaster to take necessary decisions. Decision-making becomes better and easier when forecasting is undertaken on scientific basis.
James W. Redfield has summarized the essential elements as follows:
1. Developing the ground work:
It carries out an orderly investigation of products, company and industry.
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2. Estimating future business:
This follows a clear-cut plan for working out future expectancies in the form of natural undertaking with key executives.
3. Comparing actual with estimated results:
Checking the attained with anticipated results of the business periodically and tracking down reasons for major differences.
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4. Refining the Forecast Process:
Once familiarity with estimating the future of the business is gained through practice, sharpening the approach and refining the procedure becomes quite easy.
