Quarterly forecasting updating revenue and expense models
Quarterly forecasting updating revenue and expense models - dating neckties
Forecasting can help them […] " In virtually every decision they make, executives today consider some kind of forecast.Forecasting can help them deal with these troubles; but it can help them more, the more they know about the general principles of forecasting, what it can and cannot do for them currently, and which techniques are suited to their needs of the moment.
Each has its special use, and care must be taken to select the correct technique for a particular application.
Forecasts that simply sketch what the future will be like if a company makes no significant changes in tactics and strategy are usually not good enough for planning purposes.
On the other hand, if management wants a forecast of the effect that a certain marketing strategy under debate will have on sales growth, then the technique must be sophisticated enough to take explicit account of the special actions and events the strategy entails.
Techniques vary in their costs, as well as in scope and accuracy.
The manager must fix the level of inaccuracy he or she can tolerate—in other words, decide how his or her decision will vary, depending on the range of accuracy of the forecast.
Here the manager and forecaster must weigh the cost of a more sophisticated and more expensive technique against potential savings in inventory costs.
Exhibit I shows how cost and accuracy increase with sophistication and charts this against the corresponding cost of forecasting errors, given some general assumptions.
These factors must be weighed constantly, and on a variety of levels.
In general, for example, the forecaster should choose a technique that makes the best use of available data.
From a strategic point of view, they should discuss whether the decision to be made on the basis of the forecast can be changed later, if they find the forecast was inaccurate.
If it This clarifies the relationships of interacting variables.
In virtually every decision they make, executives today consider some kind of forecast.