Chapter 6 Forecasting

Abstract

Within every business there’s a need to plan ahead. If we didn’t then there’s a likelihood of not having enough food to cook, not enough staff to serve or lots of empty rooms. You could also have too many staff, or too much food, which would lead to wastage and unnecessary expense.
Forecasting is a simple technique that lets any manager plan for the more efficient working of their area, and use of resources. Generally forecasting means to ‘look ahead’ but in hospitality we use it to mean planning on a short-term basis – that is: tomorrow, next week, next month. The term ‘budget’ is used to mean a formal, detailed plan for the next financial year and a ‘strategic plan’ is used for long-term (around five years) planning. We will look at these two briefly towards the end of this chapter but the main purpose is to look at forecasting and to see the effect of not planning ahead from both customer service and financial aspects. We’ll also look at predicting cash flows, which helps the business manage their working capital.
By the end of this chapter, therefore, you will be able to:
- Understand the importance of forecasting to the business
- Calculate profits from forecasted volumes
- Differentiate between budgeting and strategic planning
- Calculate a cash forecast.