14 Aug 2022

119

Revenue Forecasting Techniques

Format: APA

Academic level: University

Paper type: Coursework

Words: 418

Pages: 1

Downloads: 0

Q1 

Qualitative and judgment forecasting methods are based on the judgments on the trends in revenue, which can be expected from every category of income. This method is essential in several conditions first, when there is little available data that is applicable, secondly when there is an abrupt change in the surrounding environment which bring about the assumptions regarding population growth, political conditions, and economic conditions. Thirdly when the administrative arrangement changes, and finally when the expenditure and revenue categories that are being forecasted rely primarily on policy choices of the government which is not based directly on the macroeconomic changes. 

Quantitative methods of revenue forecasting rely primarily on the available data, which often are strictly related to the revenue sources. There exist two types of quantitative forecasting methods; time forecasting which is based on projection and identification based on the past trends, and the construction of causal models by using the specification of the model, which relates to a specific revenue type to the assumed variables that cause it. 

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The state of the economy and industry is a factor that affects the type of forecasting to rely on as a growing economy signals prosperity and consumers are portrayed to be less likely to resist purchasing (Campbell & Player 2017). 

Demographic changes may shift the customer base and negatively influence the sales if one does not keep a keen eye and adapt to their differences. Technology changes are also to be considered, as their movement has to be modified to for instance scanners have replaced fax machines, and online document transmission replaced the sharing of documents. 

Q2 

The purpose of the forecast is to determine the accuracy and power that is required of the methods that govern the selection of the techniques to be used. To decide whether to enter into a business may only need a gross estimate of the size of the market as the forecast that is made for forecasting is on budget purpose are to be entirely accurate. If the prediction is for benchmarking to evaluate their performance, the method that is used is takes into special consideration actions such as marketing options and promotions. 

The dynamics and components of the system that the forecast centers on is made by clarifying the relationships between the variables that interact. The manager and the one in charge of forecasting have to review the flow chart that indicates the relationship of different elements in the distribution systems, production system, and the sales system. The flowchart shows the parts of the system that is under the control of the firm that is being forecasted. 

Reference 

Campbell, P., & Player, S. (2017). A Quick Start Guide to Financial Forecasting : Discover the Secret to Driving Growth, Profitability, and Cash Flow Higher. 

Samonas, M. (2015). Financial forecasting, analysis, and modelling : A framework for long-term 

https://www.statista.com/statistics/249091/percentage-composition-of-us-government-tax-revenue-and-forecast/ 

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StudyBounty. (2023, September 14). Revenue Forecasting Techniques.
https://studybounty.com/revenue-forecasting-techniques-coursework

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