What is financial forecasting?

Financial forecasts are fundamentally informed guesses, and there are risks involved in relying on past data and methods that cannot include certain variables. Forecasting approaches include qualitative models and quantitative models. Companies use forecasting to help them develop business strategies.

What does a forecaster do?

Above all, the forecaster’s task is to map uncertainty, for in a world where our actions in the present influence the future, uncertainty is opportunity. Unlike a prediction, a forecast must have a logic to it. That’s what lifts forecasting out of the dark realm of superstition. The forecaster must be able to articulate and defend that logic.

How accurate is your forecasting?

Forrester found that only 43% of respondents are forecasting within 10% accuracy. Even more glaring, 10% of respondents indicated that they regularly miss their forecasts by 25% or more. Revenue leaders whose teams are weak at forecasting are perpetually at risk of surprise outcomes.

How do business forecasts work?

While there might be large variations on a practical level when it comes to business forecasting, on a conceptual level, most forecasts follow the same process: A problem or data point is chosen. This can be something like "will people buy a high-end coffee maker?"