Prediction, basically a forecast or a projection on a future event, depending on past and present performance and trends. On the contrary, planning, as its name indicates, is the process of drawing up plans for what should be done in the future, and even that is based on current performance more on expectations.
Planning and forecasting are two important managerial functions that are relevant to other functions. Basically, the forecasts talk about what could happen practically, depending on the company's performance in the past and at the moment. On the contrary, planning involves thinking before acting, that is, deciding today, what to do tomorrow. This article attempts to eliminate the differences between forecasting and planning.
|Sense||The forecast alludes to the estimate of the future performance of an entity, considering the performance and past and current events.||Planning is a process of looking ahead and projecting the future course of action for the company and also for various other units within it.|
|Based on||Postulations and assumptions, which imply a certain degree of hypothesis.||Relevant information, forecasts and objectives.|
|Worried with||Estimation of future events or trends.||Evaluate the future and provide for it.|
|Points out||The facts||Facts and expectations|
|responsibility||Different levels of managers or sometimes experts are employed by management.||Senior executives|
Definition of forecast
The forecast used to indicate the analysis and elucidation of a future state, concerning the company's operations. a process that takes into account past and present information and facts to anticipate future events. Simply put, forecasts refer to the future and predetermine future trends and events, along with their impact on business organization.
The forecasts are carried out by managers who work at various levels, however, sometimes experts like analysts, economists and statisticians are employed by the company to make forecasts. There are two forecasting methods:
- Quantitative forecasting method
- Time series analysis
- Econometric analysis
- Regression analysis
- Qualitative forecasting method
- Delphi method
- Consumer surveys
- Executive Opinion
There is no predictive technique, capable of predicting the future course of events with a 100% accuracy, ie a certain amount of hypothesis always present in it, and therefore the error could occur.
Planning can be defined as a basic managerial activity, which decides in advance, what, how and when something needs to be done. It refers to the design of a future course of action, which focuses on achieving the desired goals for the company. a purpose-oriented, intellectual and all-pervasive activity.
Planning connects the company with its future environment, as it bridges the gap between present and future. It involves:
- Determine future actions e
- Make arrangements to get the same.
Planning is a process in which relevant information and facts are collected and analyzed, to formulate assumptions and assumptions for the future. Considering these hypotheses and premises, an action plan is formulated to achieve the organization's objective.
In short, planning refers to looking to the future and taking a look at the future, so as to highlight approximate events, with a little discretion. The process helps companies match their resources with goals and opportunities.
Key differences between forecasting and planning
The main points of difference between the forecast and the planning are illustrated below:
- A process of thinking ahead of the future course of action for the company and also for various other units, within it, called as planning. Otherwise, the forecast implies forecasting the future performance of the company, taking into account past and current performances and events.
- The predictions are based on postulations and hypotheses, which imply a certain degree of clue and therefore the possibility of error cannot be completely removed. On the other hand, planning is based on relevant information, forecasts and objectives.
- The forecast linked to the forecast of the future course of the event or trend. Compared to this, the planning associated with the evaluation of the future action and the adoption of provisions to achieve the same objective.
- The forecast takes into account facts relating to the past and present performance of the entity. On the contrary, planning takes into consideration past and present data and facts, as well as aspirations, to decide in advance the future course of action.
- The foresight carried out by different levels of managers, or sometimes experts, such as statesmen, analysts and economists are employed by management. Conversely, the responsibility of the upper level executives to formulate plans for the business.
Based on past and present company performance, revenues can be estimated as:
|March 2014||50, 00, 000|
|March 2015||80, 00, 000|
|March 2016||1, 25, 00, 000|
|March 2017||2, 00, 00, 000|
|Forecast (for 2018)||3, 00, 00, 000|
|Planning (for 2018)||3, 50, 00, 000|
Thus, the forecast for the next financial year Rs. 3 crore that is nothing but an estimate, that the company could reach. On the other hand, the company plans to obtain Rs. 3, 50 crore, in the next financial year, which is based on forecasts and aspirations.
Planning and forecasting, both require skills such as reflective thinking, hyperopia, decision making, experience and imagination, on the part of managers, in order to perform the difficult task effectively and efficiently. Forecasts play an important role in the planning process as planning structures rely on forecasts.