Overview

Forecasts are used to assist managers in the short-term operations of their businesses. More than any other financial document, forecasts are the key management tool used to plan the details of the daily operations for the next week. Like the operating budget, forecasts look to the future and assist management in the detailed planning of operations for the next week or month. They involve the shortest time period (daily and weekly) and are the last financial document prepared in advance of actual daily operations. For example, weekly revenue forecasts are used to develop weekly wage schedules as a business prepares for the next week of operations.

The major inputs to a forecast are, first, the historical daily averages provided by Yield Management or other demand tracking programs; second, the established budget; and third, recent events that affect the current operating environment of the business. Yield Management looks to the past and provides detailed information on daily room revenue actual results. The operating budget is the formal annual financial plan for a business and is prepared once a year. It is generally approved by December for the next year and does not change. Forecasts are used to update the budget. Recent events and trends in the market- place need to be considered. The forecast is the management and financial tool that adjusts the budget to reflect these changes. It is then used to plan the details of each day's operations. Forecasts can both increase or decrease budget numbers based...