- Do prepare a regular forecast. It’s surprising how many businesses simply do not prepare a regular forecast. How do managers in these businesses know what is coming down the road?
- Don’t confuse a target with a forecast. A target is what you would like to achieve. A forecast is an honest appraisal of what you think you will achieve. These two things are very different.
- Don’t disappoint. Think about who is going to be using your forecast and what actual result would be disappointing for them. Aim to produce a forecast that will not disappoint them. And to be clear, yes, I mean lowball it as much as is credible. This will help not just you but also whoever you are giving it to in the long run.
- Don’t rely on a single person or function. Forecasting is best carried out by multi-disciplinary teams. Simply relying on the sales team for a sales forecast without input from purchasing and others in operations is unlikely to succeed as the bias of the sales team will come through.
- Don’t Ignore bias. Everyone in a business is going to be prone to bias of some sort, whether this is based on ignorance, previous experience or a desire to look good. The mistake is not recognizing this & doing something about it.
- Do take time to learn. Every good forecasting process will have time for reflection allowing managers to take a look at how actual performance compared to forecast and the reasons that this happened. From this reflection lessons can be learned that will improve both forecasting and the management of the business.
This is one a series of tips about forecasting: Why not check out the others?
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