12 Describe the elements of the good forecast and their rela

12. Describe the elements of the good forecast and their relation to the forecasting process.

Solution

We know that forecasting is essential thing for doing business. Without forecasting system we cannot be able to plan our next future strategy. Forecasting system helps management to take decisions at present time so that they can achieve their goals, set by the forecasting system. So here we will consider the essential elements of forecasting and their relation with forecasting process.

1. Forecasting should be on time- The forecast should be on time so that we can make our next strategy according to it. If the forecasting is not on time then there is no use of forecasting because the forecasting is used to take decision at the right time. So when we start the forecasting process, we assure that the timing of forecasting should be correct.

2. Accuracy of forecast- Accuracy of forecasting should be high so that we take the right decisions and make our plans according to it. For the high accuracy we must analyze our current available data seriously so that we can do the right forecasting. So accuracy is very important in forecasting process.

3. Forecasting should be in written form- The forecasting should be in written form so that management will be able to match their forecasting with the results. This comparison of results with forecasting helps to improve the accuracy of results and also helps to assure the reliability of forecasting. So the forecasting process should be in the written form for future purpose.

4. Units used in forecasting- The units of forecasting should be according to the purpose of forecasting. For example if we do forecast for any accounting firm, then we have to forecast in the correct currency. Like for any American accounting firm, we have to forecast in Dollars. This point should be keep in mind before doing any forecasting process.

5. Should be easy to understand- This is the most essential term in forecasting. We have to forecast in a very easy form so that it can be understand by any people in the management and take correct decision according to it. So this is a very important factor term in forecasting process.

So as per the above points, we discussed all the important elements of forecasting and their relation with forecasting process.