Business forecasting Essay Example | Topics and Well Written Essays - 1250 words

Business forecasting - Essay Example Budgets do not simply indicate the upcoming period’s expenses and revenues, as competition in the market place increase, companies have recognized the need to accurately predict their future operations’ outcomes and the related resource requirements. Budgeting involves use of forecasting techniques, it is an organization-wide process and is central in strategic planning. Effectiveness of the budgeting process depend on the accuracy of forecasts, reliability, simplicity, and cost effectiveness, this accuracy can be enhanced by use of various techniques, using more than one method of forecasting, and obtaining enough and more accurate data (Rasmussen 2003, p. 113). Where budget forecasts fall far from actual outcomes for the period, it is likely that poor decisions on future projections are made and management may end up lacking trust in budgets made while the whole organization may suffer poor planning. Poor budgeting forecasts results from poor budgeting tools lack of s taff training on forecasting techniques, too little time allocated in making correct projections. Correct budget forecasts makes financial planning and execution of operating activities like staffing, inventory management, marketing plans, and performance easier. Budget forecasting is used in making different types of budgets including purchase of raw materials, inventory levels, adjusting incentive plans and staffing levels. Budget forecasting is central in project planning and costing, financial outlays and staff.