Why the forecast is not a new planning

In addition to annual budget planning, many companies also use one or more forecasts to manage their business. In most cases, this makes sense and provides a valuable contribution to the achievement of the company’s goals.

What are the success factors of the forecast?

Both forecasting and planning are part of corporate management

However, companies often make a cardinal mistake: they replace the original planning with the forecast. They argue, for example, that the forecast is an update of the original planning. The world has moved on since the planning was drawn up and the targets formulated at that time can no longer be achieved “under any circumstances”.

However, this is a fallacy. The forecast is not a new planning process. Rather, the forecast fulfills independent tasks within the framework of corporate management and contributes to achieving the goals defined in the planning.

Difference between planning and forecasting

Budget planning provides answers to the question of which goals are to be achieved in a company. It arises in the context of the strategic and operational orientation and is based on the knowledge of the internal and external framework conditions at the time of planning. The forecast, on the other hand, provides an outlook and answers the question of what can be achieved under the current framework conditions, which change over time.

What are the benefits of the forecast?

The main benefit of the forecast becomes clear when you consider its actual purpose. A forecast is used to analyze, on the basis of the changing framework conditions, which measures can be used to close a possible gap between the original planning and the currently forecast target achievement. As a rule, changing framework conditions also imply a gain in knowledge, which should be used to review the orientation defined in the planning and to readjust the relevant adjusting screws if necessary.

Conclusion: Adjusting corporate management with the forecast

The forecast functions primarily as a supportive management tool for adjusting corporate management in a measure-oriented manner. In this way, the forecast offers the opportunity to achieve the originally defined goals even under new general conditions.