There are several methods for forecasting in a business environment and they fall under quantitative and qualitative, it is also important to remember that a forecasting method is different from a forecasting type. “A forecasting type identifies the target you’re pursuing (sales, cash flow, etc.).A forecasting method is HOW you gather and identify data (qualitative vs. quantitative).” (Holdaway 2021)
For Qualitative methods, we have the Delphi method which is a process in which there are three groups work together to develop forecasts. The group members are decision-makers (experts who make the forecasts), staff personnel (assist decision-makers by producing questionnaires and surveys and gathering results), and respondents (individuals with valued opinions that will take the surveys.) The jury of executive opinion uses high-level managers to give opinions and in conjunction with statistics gives forecasts. In the Sales force composite, the salespeople for a company are asked to give their estimations on sales in their regions and the results are used to develop forecasts. The final method is consumer market surveys which gather data from customers to build forecasts.
On the quantitative side, we have Causal methods that look at past data such as regression which takes a set of observed data and its effect on another variable to form a trend forecast. Time-series methods use past data and use averages, patterns, and data to estimate future trends.
To develop a forecast you must first develop the basis of forecasting by figuring out the company’s condition and market position, then estimate the future operations of the business, regulate the forecast by looking at past forecasts and their results, and finally reviewing the entire process for improvements.
Using Microsoft Excel you can take a large quantity of data and use the forecasting functions to develop forecasts.
In my attached sheet I have done a forecast of inventory and cost of goods sold the forecast gives a predicted forecast of where sales will be for the next 10 quarters.
Reference
Holdaway (Jan 27, 2021) 4 different business forecasting methods, Divvy, https://getdivvy.com/blog/types-of-business-forecasting-methods/
