Philosophies of good forecasting.

Best practice considerations

There are several forecasting philosophies that underpin a good forecast.

Transparency

Easy to understand what is driving the forecast – this ensures credibility and a confident assessment of opportunities and risk.

Simplicity

Generates required level of understanding without overcomplication as this results in reduced compliance and lack of confidence.

Applicability

Appropriate to forecasting context and decision being made which helps to maximise the positive impact of the forecast.

Consistency

Ideally everyone has a common understanding of the forecast across the organisation so better and more efficient decisions can be made.

Create a Structured Approach to the Forecast

Define the market – To quantify the current market size and structure. The forecast context and data available play a key role in choosing the methodology.
Trend the historical data – To create a base line forecast. Assume no future events will occur as these will be applied separately.
Add future events – to reflect what else might happen in the market that is new. A common example of an event is the launch of a new product.
For patient-based models, there is an additional step, which is to convert patients into units and revenues. While for sales-based models, the volume outputs will need to be converted to revenue.

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