Forecast

Forecast

A prediction of future financial or operational results based on historical trends, current information, stated assumptions, and expected business conditions, providing forward-looking guidance for planning and decision-making.

For example, a retail chain might develop quarterly sales forecasts by analyzing historical sales patterns, adjusting for planned store openings, incorporating expected economic conditions, and applying growth assumptions by product category, resulting in projected monthly revenue figures for the coming year.

Forecasts differ from budgets by focusing on prediction rather than setting performance targets, though they often inform budgeting processes. Effective forecasting combines quantitative methods (time series analysis, regression modeling, or simulations) with qualitative inputs (market intelligence, expert judgment, or scenario planning). Forecast horizons vary by purpose—short-term operational forecasts (1-3 months) guide inventory and staffing decisions, while long-range forecasts (1-5 years) support strategic planning and capital investment. Modern approaches often employ rolling forecasts that continuously update projections as new information becomes available, providing greater agility than traditional annual cycles. Accuracy improves through regular comparison of forecasted results against actuals, identifying prediction patterns and refining methodologies over time.