Even rumours can affect market variables. If the past data are not available, then forecast is made on guess-work, without a base. Planning is the road map to achieving an organization’s short and long term goals. This type of forecast may cover from more than one year to two or four years. An accurate forecast enables a business owner to keep a lower inventory, thus reducing costs. In certain cases forecast may become inaccurate. Market demand may be affected by controllable-price, distribution, promotion, etc., and uncontrollable-demographic, economic, political, technological development, cultural activities etc. The expected sales forecasts of all the industries, in the same line of business are combined. Forecasting is one of the important aspects of administration. The two major types of forecasts are qualitative and quantitative. Labor forecasting, or accurately planning worker schedules, can take up hours of management's time each week. 4. This limitation can be overcome by dividing the project into phases and then plan for every phase individually. According to American Marketing Association, “Sales forecast is an estimate of Sales, in monetary or physical units, for a specified future period under a proposed business plan or programme and under an assumed set of economic and other forces outside the unit for which the forecast is made.”. The nature of the future is uncertain, and most of the times things do not come as expected. It may affect the sales. Disadvantages of Forecasting Models It is not possible to accurately forecast the future. A sales forecast is an estimation of sales volume that a company can expect to attain within the plan period. Although forecasting that uses such data is highly mathematical, it makes a crucial assumption that history predicts the future. Involve concerns persons to make the planning more accurate and error-free. As such, the pricing policy, design, advanced technological improvements, promotional activities etc., of similar industries must be carefully observed. 7. Financial planning is mainly based on estimation and forecasting techniques like future assumptions and past records. You will always have variation in demand that change year to year, which is based off of marketing efforts, competitor efforts, macro and micro economic factors, and more. Content Filtrations 6. Moving averages are available with many charting applications and offer a quick, easy way to see trends in a stock, commodity, or … Here's a closer look at what businesses need to know to put labor forecasting to work in their own business processes. This type of forecasting normally includes the effects of the leading indicator series and other complex economic data.

Satisfied customers keep on buying from the company in the future. Short-run forecast is preferred to all types and brings more benefits than other types. This helps the management to estimate probable profit and control over budgets, expenditure, production etc. And trend of fashions, religious habits, social group influences etc., also carry weights. Sales forecasting takes time, often requires the use of expensive technology tools and is open to errors. The uncertainty associated with the future along with other factors that are not in the control of the management are limitations of financial planning. The following limitations of forecasting are listed below: The basis of Forecasting: The most serious limitations of forecasting arise out of the basis used for making forecasts. Accurate predictions allow a business to purchase raw materials, parts and services more favorably because it has sufficient time to shop for prices. Accurate sales forecasts make valuable contributions to a business, but forecasts are not always accurate. Sales forecasting is the determination of a firm’s share in the market under a specified future. National income, Government expenditure, Unemployment, Consumer spending habits etc. Financial planning should be carried out with extreme care and prudence because a little mistake at the planning stage can be a cause of project failure at the time execution.