What is Forecasting?

Forecasting is a process which involves making educated guesses about future events that could affect a company. Businesses can predict sales, finances, customer demand, and market changes by examining past data, trends, and patterns. It helps companies make decisions, plan, and manage risks. However, the future is uncertain, and predictions may not always be accurate. Unforeseen events can impact forecasts, so it’s important to regularly review and update them as new information becomes available.

Features of Forecasting are:

• Uncertainty: Forecasts are not guaranteed, as the future is inherently uncertain. Unanticipated factors or events can affect the accuracy of predictions.
• Assumptions: Forecasting often relies on certain assumptions, which, if incorrect, can lead to inaccurate forecasts.
• Continuous Process: Forecasting is an ongoing process that requires regular review and updates based on new information, changes in assumptions, or market conditions.
• Goal-oriented: The purpose of forecasting is to support decision-making, risk management, and planning to achieve specific objectives or goals.

Planning and Forecasting are both essential components of management, but they serve different purposes and involve distinct processes. Planning is deciding in advance what to do, how to do it, when to do it, and who is to do it; whereas, Forecasting involves making educated guesses about future events that could affect a company.