Question

How does:

1. Revenue forecasting affect the rest of the budget process? (100 words).

2. What are the limitations of revenue forecasting technique? (20–60 words).

3. How can this be countered? (20–60 words).

4. There are several managers—including sales, production and transport—in the company where you work who each understand the company’s budget objectives. As the head accountant you have been given last year’s master budget and told to use all sources of information in assembling objectives and assumptions for the next year’s expense budgets. (100–120 words)

Answer 1

Revenue Forecast Process :

As part of assisting with the updates of all 27 metropolitan long range transportation plans, FDOT develops a long range revenue forecast. The forecast horizon is agreed upon by FDOT and the MPOAC. The forecast reflects changes in state revenue since the previous forecast approximately five years prior. The revenue forecast includes estimates through the agreed upon horizon year to provide all MPOs projections concerning state and federal funds that are expected to be included in the FDOT Work Program. The statewide forecast provides consistency and a basis for financial planning across all 27 MPOs. This section provides an overview of roles and responsibilities and details the methodology for producing the revenue forecast.

Limitations :

Limitations pose barriers beyond which forecasting methods cannot reliably predict. There are many events and values that cannot be forecast reliably. Events such as the roll of a die or the results of the lottery cannot be forecast because they are random events and there is no significant relationship in the data. When the factors that lead to what is being forecast are not known or well understood such as in stock and foreign exchange markets forecasts are often inaccurate or wrong as there is not enough data about everything that affects these markets for the forecasts to be reliable, in addition the outcomes of the forecasts of these markets change the behavior of those involved in the market further reducing forecast accuracy.

how can this countered?

Creating revenue and growth forecasts can be one of trickiest parts of business planning and fundraising for startup entrepreneurs. These numbers are likely to change dramatically once you get going, but they are still needed and expected. Below is a quick guide outlining methods of generating financial projections and key growth factors.