Among the various activities and functions performed in the management, Planning and Forecasting are two of the most essential functions. Both these functions are integral for any organization and help in the growth and development of an organisation. Various other functions within an organization are dependent on the process of Planning and Forecasting.
Planning and Forecasting are closely related to each other. Both these functions are key steps in the decision making process. They determine the possibilities in a company based on the past and present performance of the company. Any kind of future predictions in a company is based on the process of Planning and Forecasting.
Though both these functions are related to each other and help in achieving the desired results, there is a major difference between both these functions. While planning relies on information and objectives, forecasting relies on assumptions and guesses.
The difference between Planning and Forecasting is that Planning is the term given to the process of coming up with plans for the upcoming future. It is based on the past and present performance of the company. On the other hand, Forecasting is the term given to the process of making predictions about a future event. It is based in the past and present trends in the company.
Comparison Table Between Planning and Forecasting
|Parameter of Comparison||Planning||Forecasting|
|Meaning||Planning refers to the process of knowing the future goals and determining the future course of action.||Forecasting refers to the process of predicting the performance of the company in the future based on the past and present trends.|
|Based on||The process of planning is based on information, objectives and performance.||The process of forecasting is based on assumptions, postulations and guesses.|
|Stresses upon||Planning stresses upon the facts and the expectations.||Forecasting stresses upon the facts.|
|Responsibility||Planning is the responsibility of the President, CEO or top-level managers.||Forecasting is the responsibility of analysts, experts or specific managers employed by the company.|
|Related to||Planning is related to the future course of action.||Forecasting is related to predicting the future performance of the company.|
|Focus||The focus of planning is to understand the future and prepare accordingly.||The focus of forecasting is to make predictions about the future trends and performance of the company.|
What is Planning?
Planning is one of the most integral tasks in the process of managing any company or business. It is one of the basic activities that are needed in any organization irrespective of its size. The process of planning helps to decide in advance how and when things should be done.
Planning helps in deciding a future course of action, which in turn helps a business to reach its goals and objectives. It basically helps to bridge any differences between the present and the future. It helps to better understand what steps are needed in the future and further helps to make provisions to achieve the necessary changes.
The process of planning relies on relevant information and facts. These facts are carefully gathered and analysed. On the basis of these facts, future decisions are made, that can help to achieve the goals and objectives of a business.
Thus with the help of proper planning, a firm can achieve a competitive edge in the market. It can look into the future and take better and well-informed decisions.
What is Forecasting?
Forecasting is a very commonly used business activity performed in all organizations. It helps any organization to stay prepared for any uncertainties of the future. Businesses usually employ managers to perform this activity. A lot of businesses hire experts or analysts to perform this activity.
Forecasting is the term given to the process wherein a business tries to predict its future trends and performance based on the past and present trends and performances. The process makes use of all kinds of past and present data to analyse and predict future trends. The process of Forecasting relies on guesses and judgements.
Experienced managers make use of their knowledge and judgment to predict or forecast the future trend of a business. A misjudgement or any kind of error while making a guess can lead to a forecasting error, which might impact the overall performance of a business. Moreover, there is no accurate forecasting technique that can give an exact idea on the future performance and trends.
An example of how forecasting is used in a business is to understand how to plan their budgets for the next year or to set aside any anticipated expenses for the future.
Main Differences Between Planning and Forecasting
- Planning refers to the process of understanding the future goals and objectives of a company and laying down the future course of action for the company. On the other hand, Forecasting refers to the process of predicting the future performance of the company, keeping in mind the past and present performance of the company.
- Planning focuses on understanding the future and taking actions based on the understanding while on the other hand Forecasting focuses on making predictions about the future trends of the company.
- Planning relies on relevant information, facts, objectives and performance while on the other hand Forecasting relies on assumptions, postulations and guesses.
- Planning is done by the President, CEO or top-level managers of the company while on the other hand, Forecasting is done by analysts, experts or specific managers employed by the company.
- Planning lays stress on facts and expectations. Forecasting lays stress on the facts.
The process of Planning and Forecasting is essential for any kind of business. Both these activities require experience, the ability to think well into the future and imagination. For any businesses to succeed, it is essential that these activities are performed efficiently.
However, Planning and Forecasting differ from each other as Planning is based on relevant facts, information and objectives of the business. Forecasting on the other hand is based on assumptions, postulation and the experience and judgements of the managers of the business.