1. Business Forecasting Chapter 11 Communicating Forecasts to Management

2. Chapter Topics • Forecasts and Their Use in Managerial Decisions • Presentation of Forecasts to Management • The Future of Business Forecasting • Chapter Summary

3. Use of Forecasts in Managerial Decision • Allows organizations to make appropriate decisions. • Essential in providing the decision makers with information on: • Forecast of sales • Cash flow • Inventory • Cost projections • Implication of tax hikes on profits • Effects of monetary policy on the business sector.

4. Presentation of Forecasts to Management • Methodologies discussed in this book can effectively be used by small and large business units. • Analysts for either sized firms can assist management to make good business decisions. • To be effective in their role as forecasters, the analyst must pay attention to the following:

5. Presentation of Forecasts to Management • Why is the forecast needed? • Who will use the forecast? • Participation of management is needed in the initial stage. • The Analyst must understand management’s problems and concerns. Specifically, they should try to understand: • What level of detail or aggregation is required. • What time horizon should be used in the forecast.

6. Presentation of Forecasts to Management • A good forecast incorporates feedback from management. • Forecasters and managers should pay attention to some common mistakes that undermine the forecasting process: • Poor or inadequate data system • Lack of commitment on the part of the middle management • Decision makers may find the data or the forecast are not available in a timely fashion.

7. Presentation of Forecasts to Management • If an incorrect model is used, the analyst should inform the management of its consequences. • The forecasting unit should be an integrated part of the existing corporate structure. • In communicating the forecast, the analyst has to recognize the political and human relations skills.

8. Presentation of Forecasts to Management • To develop the human relations skills and protect the integrity and objectivity of the forecast, the analyst should follow the recommendations of Bails and Pepper (1993): • Become familiar with those who use the forecast. • Learn about the user’s concerns. • Before you start your forecast, resolve any concerns of a particular business unit. • Defend your forecast against purely political concerns.

9. The Future of Business Forecasting • Uses of forecasting are numerous. • Good decisions are based on good forecasts. • Forecasts are used for: • Budgeting • Planning • Specific areas such as production, inventory control, marketing, advertising, sales projections, and investment. • Recent economic downturns around the world point to the need for strategic planning.

10. The Future of Business Forecasting • Forecasting tools can effectively be employed in such planning strategies. • Given the interdependence of nations on trade, resources, and investments, business organizations cannot make choices without good forecasts.

11. Chapter Summary • Communicating the results of a forecast is just as important as making the forecast. • The forecasting process calls for a clear understanding of who, how, and when the forecast is used. • Forecasters need to understand how management wishes to use the forecast—planning or control and budgeting. • In a globalized world, good forecasts provide strategic tools for management.