In business, it is essential to be able to make decisions based on the information available and to analyse this information in a rigorous manner. Whilst there are many different ways in which this information can be gathered, let’s take a look at five recognised forecasting models.

1. Moving average

This forecasting technique, as its name suggests, involves looking at the moving average – the average over a period of time – to identify trends. Accounting figures can be useful for this purpose and may show seasonal fluctuations.

Image Credit

  1. Time series analysis

    Time series analysis puts a greater focus on patterns and trends with a view to predicting the future. This model can be useful when making decisions on production or sales.

    3. Regression analysis

    Regression analysis can be used to compare the relationship between variables, which can be useful when it comes to making decisions. Consider engaging with a chartered accountant if more detailed figures are required.

    4. Exponential smoothing

    There is a further forecasting model that can be useful when there are known recent changes that will impact the data under analysis. Using exponential smoothing methods places a greater emphasis on more recent data and can be useful to deal with these more recent changes.

    5. Linear regression

    Finally, linear regression can be used to create a formula that allows for future predictions based on historical data. By recognising variables and the likely impact of these variables, more accurate predictions can be made and better management decisions can be achieved.

    A combination of models may be desirable to achieve the end result for the management team.

Image Credit

Undertaking forecasting

At times, forecasting can be incredibly challenging; if this is the case, it can be wise to seek the assistance of a Stroud business coach such as www.randall-payne.co.uk/services/business-advisory/business-coaching/.

Not only will a business coach have expertise that is broader than the knowledge within the specific business but also they will have access to wider techniques and resources to undertake the forecasting. The guidance this expertise can provide will be invaluable.