Forecasting

Forecasting is a technique that uses historical data as inputs to make informed estimates that are predictive in determining the direction of future trends. Businesses utilize forecasting to determine how to allocate their budgets or plan for anticipated expenses for an upcoming period.

Four types of forecasting models

Time series model.

Econometric model.

Judgmental forecasting model.

The Delphi method.

There are two types of forecasting methods: qualitative and quantitative. Each type has different uses so it's important to pick the one that will help you meet your goals.

There are several specific areas where forecasting is used in budgets and similar financial statements.

1. Costs

2.  Revenues

3. Market Effects