Forecasting is the process of predicting the future by using both present and past data. Forecasting can also be defined as a process of envisioning the potential outcomes of different decisions in an organization (Judith & Baker, 2011). This may include decisions that affect a business as a whole or those that affect a specific product line or the industry in which a business operates.
One importance of forecasting is that it assists managers of various business organizations to implement changes at the right time whenever change is predicted. This allows organizations to obtain the greatest benefits since they are able to take proactive actions to change, thus avoiding reactive actions to change, which do not provide great benefits. Forecasting also helps organizations to avoid spending time, money, and other resources for the activities that are likely to fail (Judith & Baker, 2011).
In addition, forecasting helps business organizations to prepare for the future. This happens when an organization requires undertaking a project in the future. Such preparations entail determining how much money will be required, where the organization will source the money, and how the money will be allocated. Besides, forecasting is very important in planning. Through forecasting, a business manager can use some past and present information to make sound planning (Judith & Baker, 2011).
In healthcare organizations, there are three types of forecasting. They are revenue, operating expenses, and staffing forecasts. Revenue forecast entails predicting the inputs of a healthcare organization in its operating budget in terms of income. This type of forecast assists executives in healthcare organizations in making future decisions concerning revenue allocation. Staffing forecast also entails predicting the inputs of a healthcare organization in its operating budget but in terms of staffing expenses. It assists health care managers to make future decisions concerning staffing needs of their respective organizations. Operating expenses forecasts entail the predictions concerning all operating expenses apart from labor (Judith & Baker, 2011).
Generally, forecasting is important in making decisions about the future. Organizations make use of the past and present information to make future decisions. Healthcare organizations utilize revenue, staffing, and operating expenses forecasts to make various future decisions.