Business Forecasting
Business Is the Art of Predicting the Future and Getting Benefit from It
“The art of predicting the future and getting benefit from it” in business can be narrowed down to one term which is business forecasting. Business forecasting is the backbone of a successful business in every business venture. According to different scholars, the management of business should always make predictions based on overall running of the business, sales and finance handling (Hailey 2007).
Business Forecasting is described as the art and method that can be used by the business owner or shareholders to make a prediction of future business activities basing it on the accuracy of your data. The information obtained can be used in the determination of future trends in finance performance, sales performance and also customer behavior. Most businesses need business forecasting, and usually, they are done on a quarterly basis, but some can prefer forecasts made on a monthly basis (Evans 2009).
Types of Business Future Predictions (Forecasts)
General business outlook. Each and every business needs a forecast to is undertaken. This is mainly to foresee the likely changes that might occur shortly. There are certain conditions that are always present in a community that a certain business operates. Some examples are; controls, population, fiscal policy, political conditions, and the national income. Due to the presence of these factors, it is necessary to make future predictions of the business (Hailey 2007).
Sales forecast. The sales department is a major determinant of success in a company. Due to this reason, sales forecast should be carried out with precaution and due care to gain business success. In every business, sales forecasting is considered as the to notch factor in planning and a major aspect to consider in an organizational setting. Plans and policies made by the business to maximize their profits are obtained from expected sales so whether sales forecast is carried out annually or yearly; it is the main factor to future business plans.
Capital forecast. Every business in operation must have financial plans. Capital should be a factor to be determined to meet present and future needs of business. Forecast based on business capital requirements is a necessity and is considered as the primary step in every organization. Accurate forecasts greatly help an organization to employ capital fully and get optimum returns from their investments (Morlidge 2010).
Major Merits of Future Business Predictions (Forecasts)
Promoting a new business in the market. Making future predictions is one vital factor that has a huge contribution when it comes to setting up of a new business. This is because starting a new business is not as easy as it is perceived by most people because business is subject to risks and uncertainties. By carrying out forecasting, the business promoter finds out if the probability of the business thriving and if the business has high competition. After making these predictions, the business promoter assembled all the necessary resources and based on the forecasting made; the business is subject to success or failure (Morlidge 2010).
Formulation of a plan. Proper business forecasting plays a major role in business planning. Major business plans require proper forecasting in business thus making it an essential aspect in consideration. Therefore, as a business person, it is always important no note that adequate planning, whether long-term or short-term highly depends on forecasting.
Estimation of financial requirements. Estimation of business finances is a major business concern because in running a business, capital is vital. Business finances can be characterized by cash used to start the business, the money stored in the bank and cash used to run the day to day operations of the business. The presence of working and fixed capital is based on sound financial forecasting.
The viability of decisions made by management. Correct management decisions highly depend on the accuracy of forecasts made. As described by various scholars, the administration is a decision-making process, and management has the responsibility of making decisions which are uncertain. In the running of business whether small or large, certain changes might occur, e.g. personnel changes and unforeseen contingencies. Decision making by management is a process that goes on throughout the life of business (Evans 2009). Therefore, forecasting is relied upon in matters of production planning and resource allocation.
Business success. Proper forecasting helps the procurement department of the business to procure the necessary and necessary raw materials based on the business needs and future needs. The accuracy of sales forecasting is essential in making budgets. When a business fails to make accurate sales forecasts, it becomes difficult for the business and management to figure out how much production should be done (Hailey 2007).
Conclusion
As discussed in this paper, prediction of future is a vital step that every business has to undergo. Through future prediction, business is assured to thrive and reach its set limits. Many advantages have been realized by businesses which have taken the step of making good and proper business forecasts. On the other hand, lack of prospects might lead to a drastic failure of business. All the discussed merits are some out of the may many benefits of making future predictions of business.
Bibliography
Evans, Michael K. Practical Business Forecasting. New Jersey: John Wiley & Sons, 2009.
Hailey, Linda. Your Business, Your Future: How to Predict and Harness Growth. Crows Nest, New South Wales: Allen & Unwin, 2007.
Morlidge, Steve. Future Ready: How to Master Business Forecasting. New Jersey: Wiley, 2010.
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