what is forecasting

Forecasting is the process of making predictions about the future based on past and present data. It is a decision-making tool that helps businesses cope with the impact of future uncertainty by examining historical data and trends. Forecasting is used by companies to estimate earnings or other data for subsequent periods. It is also used to determine how to allocate budgets or plan for anticipated expenses for an upcoming period of time. Forecasting can be done using formal statistical methods employing time series, cross-sectional or longitudinal data, or less formal judgmental methods. There are two basic methods of forecasting: qualitative and quantitative methods. Qualitative forecasting offers subjective results, as it is comprised of personal judgments by experts, while quantitative forecasting uses analytics to analyze large amounts of data. The most trustworthy forecasts combine both methods to support their strengths and mitigate their weaknesses.