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What is business forecasting and how does it differ from planning?
Forecasting estimates what is likely to happen, such as future sales or cash flow, based on historical patterns and known drivers. Planning sets what the business intends to achieve and how. A forecast is a prediction; a plan or budget is a commitment, and comparing the two shows where reality is drifting.
Forecasts can be simple, such as a moving average or seasonal trend, or more advanced, using statistical or machine learning models. Complexity does not guarantee accuracy.
Good practice includes:
- Stating the forecast horizon and the margin of uncertainty
- Tracking forecast error over time
- Updating as new data arrives
A simple, well-understood forecast that people trust usually beats a sophisticated one nobody can explain.
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