Forecasting is a strategy used in different fields to predict the future based upon the past. This strategy is pulled from different data sources to provide a financial expert or entrepreneur with the needed information to run a business or invest more effectively and successfully. Forecasting methods can range from manual spreadsheets to complex technology-based programs that integrate all kinds of date to predict future growth.
Forecasting Based on Thoughts and Feelings
When a forecaster uses their thoughts and feelings to make predictions, the subjective approach to forecasting is being implemented. Often, this form of forecasting involves groups of people getting together to brainstorm and solve complex problems. This forecasting method has no factual data to back up predictions and is typically used when there is not enough time to use formulas and mathematical forecasting methods. Although predictions using subjective forecasting may be accurate, these are typically biased. It is best to back up this method with another method.
Using Time as a Forecasting Method
Time Series forecasting uses periods of time to make future predictions in regards to businesses, finances, or other complex issues. This method of forecasting is typically used in situations to measure trends that increase and decrease over periods of a year or even on a month-to-month basis. Many businesses and sales forecasting programs are based on the time series forecasting method. This method tends to provide more accurate data to assist businesses in where, when, and how to boost sales. The time series method can also help when determining product supply and demand.
Series of Questionnaires and Experts
A forecasting method using a series of questionnaires and expert opinions is referred to as the Delphi Method. In the 1960s, a group of experts were gathered and given questionnaires to answer. These were collected and the results put together to create a second questionnaire. The experts continued to receive these compiled questionnaires until the forecasting predictions were narrowed down to only a few options. Today, this method of questioning and requisitioning is still used a method of forecasting.
Everyone tends to consider the worst and best case scenario, and these are not exempt when it comes to forecasting methods as well. The use of scenarios is often referred to as scenario writing. All possible scenarios are written out based upon different criteria. Then, a person who is making the decisions regarding the business, financial forecast, or other decision, reviews all the possible scenarios to determine which options or predictions seems to be most accurate. Three scenarios are usually chosen to provide a best, worse, and middle ground based scenario.
Forecasting is an important task for many businesses, government entities and financial experts. It helps those predict what changes need to be made to keep a business on track or keep a financial portfolio in tiptop condition. No matter what method, using forecasting methods can be a great way to provide data and make decisions in most cases where individuals are faced with solving a problem.