Business Forecasting is an approximation or prediction of future developments in business such as sales, expenditures and profits. Business forecasting has become a prominent part of corporate planning and an indispensable tool for organizations to use to anticipate economic trends and prepare to benefit from them or to counteract them. Two common forms of business forecasting includes qualitative models and quantitative models.
Qualitative models are typically successful with short-term forecasts in which the scope of the forecast is limited. Qualitative forecasts can be viewed as expert-driven. That is, they depend on expertise from general market to offer an informed consensus. Qualitative models are valuable to predict the short-term success of organizations, products and services. There are however, inherent limitations caused by its reliance on opinion over measurable data.
Quantitative models do not rely on expert opinion and aims to eliminate people from the analysis. Quantitative models are only interested with data and steers clear from the attitudes or beliefs of the people underlying the numbers. Quantitative models also aim to predict where variables like sales and gross domestic product will be months or years later.
Forecasting is useful in multiple situations and impacts several aspects of organizations. Forecasting can be used to ensure the right product is at the right place at the right time. It also assists organizations to reduce excess inventory and increase profit margin. Additionally, forecasting also helps businesses meet consumer demand.