Top 8 Advantages of Business Forecasting

This article throws light upon the top eight advantages of business forecasting. The advantages are: 1.  Establishing a New Business 2. Formulating Plans 3. Estimating Financial Needs 4. Facilitating Managerial Decisions 5. Quality of Management 6. Encourages Co-operation and co-ordination 7. Better Utilisation of Resources 8. Success in Business.

Business Forecasting: Advantage # 1. Establishing a New Business:

While setting up a new business, a number of business forecasts are required. One has to forecast the demand for the product, capacity of competitors, expected share in the market, the amount and sources of raising finances, etc.


The success of a new business will depend upon the accuracy of such forecasts. If the forecasts are made systematically, then the operations of the business will go smoothly and the chances of failure will be minimised.

Business Forecasting: Advantage # 2. Formulating Plans:

Forecasting provides a logical basis for preparing plans. It plays a major role in managerial planning and supplies the necessary information. The future assessment of various factors is essential for preparing plans. In fact, planning without forecasting is an impossibility. Henry Fayol has rightly observed that the entire plan of an enterprise is made up of a series of plans called forecasts.

Business Forecasting: Advantage # 3. Estimating Financial Needs:

Every business needs adequate capital. In the absence of correct estimates of financial requirements, the business may suffer either from inadequate or from excess capital. Forecasting of sales and expenses helps in estimating future financial needs.

The plans for expansion, diversification or improvement also necessitate the forecasting of requirements of funds. A proper financial planning depends upon systematic forecasting.

Business Forecasting: Advantage # 4. Facilitating Managerial Decisions:

Forecasting helps management to take correct decisions. By providing a logical basis for planning and determining in advance the nature of future business operations, it facilitates correct managerial decisions about material, personnel, sales and other requirements.

Business Forecasting: Advantage # 5. Quality of Management:

It improves the quality of managerial personnel by compelling them to look into the future and make provision for the same. By focussing attention on future, forecasting helps the management in adopting a definite course of action and a set purpose.

Business Forecasting: Advantage # 6. Encourages Co-operation and co-ordination:


Forecasting calls for some minimum effort on the part of all and. thus, creates a sense of participation. It is not a one man’s or one department’s job. No department or person can make its forecasts in isolation. There should be a proper co-operation and co-ordination among different departments for setting proper forecasts for the business as a whole.

So, forecasting process leads to better co-operation and co-ordination among people of various departments of the organisation.

Business Forecasting: Advantage # 7. Better Utilisation of Resources:

Forecasting ensures better utilisation of resources by revealing the areas of weaknesses and providing necessary information about the future. Management can concentrate on critical areas and control more effectively.

Business Forecasting: Advantage # 8. Success in Business:

Success in business, to a great extent, depends upon correct predictions about the future. Systematic forecasting ensures smooth and continuous working of the business. By knowing the future course of events in advance, one could always face the difficulties in a planned manner.

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