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According to the Evans (2003) business forecasting is the process of analyzing available data and using it to predict the future outcome of the business. It is important that every business analyses all information at its disposal for strategic reason. All the departments of a business enterprise should work together and take into consideration all the issues necessary to make business predication in order to forecast changes that are likely to affect the business in future. According Evans (2003) each department be it sales, product or service oriented, data collected must be accounted for. Customer trends their behaviors and their retention is a direct result of a quality business forecast procedure. Several estimates methods are used here in order to clearly cut out the mistakes on potential estimates in budgeting and related action. They include regression, and series analysis. This study therefore seeks to show the importance
Business Forecasting involves a collection of tools and such analysis which include spreadsheet or electronic exchange of information. The aim of conducting these analyses is to impart the aspect of accurate prediction and identification of sources or alternatives for the course of actions to be taken in response to various occurrences. Shim (2000) observes that the major aim of the activity is to empower and enable businessmen to make or adjust variables in the course of their business in order to realize the best yield possible.
Importance of business forecasting
Businesses that deal with both service and products have a focal point of making the highest sales and maximizing profits while minimizing losses. According to statistical forecasting (2006), there are immediate points of importance that are outlined by the accurate business forecasting. These may include enhanced cash flow, timing on when to buy or not, ability to produce in a good and productive sense, the ability to have a predictable sales patterns and so on. Business forecasting further give the owners of business enterprises the ability to predetermine the return on investments and the actual value of the business above the value of its assets. Meanwhile, the management can use the information generated through business forecasting and utilize the available resources optimally thus enabling the business to cope with hitches that may arise in its operation.
The achievement of any business is estimated using the efficiency in its operations, high revenues and reduced expenses of marginal costs of production. The aspect of revenue increase comes as an eventual combination of all efforts resulting from the planning analysis of all operations. It’s a subset of reduced costs minimum wastage and high customer retention and turnover. All which come as a result of accurate and error free business effort. The addition to that the forecasting must be integrated in all aspect of the business operations mostly from the day to day activities to the long-term or strategic plan of the whole company.
Like any other business entities, hospitals can derive numerous benefits from business forecasting. For instance, Hermann hospital, medical service provision center can use the forecasting skill or knowledge to determine future changes in the demand for medical services. The hospital in its provision of medical services deals with individuals i.e. a one on one client monitoring. The department responsible to monitor the clients-patients has a great mandate to put into consideration an accurate prediction analysis, and forecast of the future of the hospital in managing an increase or decrease in the number of patients or increase. A prediction or forecast that proves to be erroneous and inaccurate brings out poor results. For instance, the turnover of patients on a particular season and the mode of settlement of their bills and outstanding financial obligations must be on point. Failure to this, it means a discrepancy between the money coming in and the services that are to be provided. Meaning essential services to be offered will grind to a halt once the incoming revenue cannot meet the required standards (Evans, 2003).
Another aftermath of a poor prediction of the business that may make it possible for losses is when there is poor stocking mechanism and inventory control, because it increases the holding and stocking cost. Such in the case of a hospital may lead to in availability of medicines and equipment such as syringes.
Assumptions of forecasting
To avoid poor performance as a result of poor forecasting, various assumptions can be used to direct the forecasting process. (Newbold, 1990). First, the future is uncertain and cannot be verified or predicted with certainty. This means the activities of the prediction must be given an allowance foe error with proper estimation. The future being uncertain has to be estimated based on the facts current affairs. Second, there are always blind spots and unseen occurrences have to be absorbed, all the activities that are related to the forecasting have to be in agreement so that future occurrence that may cause a setback can be easily be accommodated.
Herman hospital is an example where the future patients visiting the hospital during certain periods of a year and as such forecasting can ensure manpower and stock of medicines are enough in readiness of the forecast’s prediction. This will ensure a favorable storage medication and accomodotation of all patients. The human resource that includes nurses accountants and support staff have to be on right numbers to avoid unnecessary during peek seasons. For the reason of organizational order and all aspects of business operations have to based on careful planning of all the activities so as to be in order
Certainly business furcating is a powerful too that can ensure that a business is well prepared to make the best out of every opportunity that presents itself. In the hospitals case, then hospital can be ready to take care of different kinds of patient in great multitudes at different times of the year. This is no doubt the highest point of efficiency any organization can ever realize.