The Importance of Forecasting


Forecasting is a key element in conducting any business. The realism that good forecasting provides can help you develop and improve your strategic plans by increasing your knowledge of the marketplace in which you operate. The forecast that you or your sales force generates is the source of information that allows you to manage virtually all aspects of your business.

Forecasting is a key element in conducting any business. The realism that good forecasting provides can help you develop and improve your strategic plans by increasing your knowledge of the marketplace in which you operate. The forecast that you or your sales force generates is the source of information that allows you to manage virtually all aspects of your business.

Here are 5 ways in which forecasting can improve your business:

1) Planning – When you make a forecast, you are also planning future activities, providing a business plan for the upcoming year or season. Assuming that you have a quota to fill, forecasting is the tool that identifies significant gaps or overages. By forecasting earlier, you afford yourself more time to create action plans aimed at overcoming any predicted challenges.

2) Demand – A forecast is your best tool to get a good estimate of the demand for the products or services you sell. This will allow you to more accurately resource your business to meet those demands, making the best decisions about hiring (permanent or temporary), marketing and expansion.

3) Supply Chain Management – The more accurate the forecast, the better prepared your company will be to manage inventory, avoiding both overstocked and stock-out situations. Stable inventory also means better management of the services you provide, and offers opportunity to take advantage of just-in-time ordering.

4) Financial planning – Anticipating sales gives you the information you need to predict revenue and profit. Having a solid forecast at your disposal also gives you the ability to explore possibilities to increase both revenue and net income.

5) Marketing – An advanced look at future business offers the opportunity to schedule promotions if it appears sales will be weak. In extreme cases, forecasts may lead to discontinuing certain products or services.