Forecasting is a financial planning technique that uses existing data, predictive estimates, and historical data to make informed decisions that determine the direction of future trends (in-text citation). Forecasting includes year-to-date (YTD) actual data that is layered into a forecasting model as it occurs, allowing future months to adjust based on changing revenue and expense, producing "expected data" as the result. This financial reflection enables university administrators to project new demand trends and thereby can assist with managing budgets and resources.

Hence strategic financial forecasting is a core component of any successful research university's financial planning process that's done continuously throughout a fiscal year to stay informed of changing conditions. It also helps finance administrators to identify unexpected issues, allowing them to take corrective action when needed (in-text citation). It's foremost a tool used to complete an institution's operational analysis; not a replacement for actual operational conditions occurring at the unit of analysis level in question (e.g., student enrollment, research activity, and faculty productivity). Thereby, forecasting seasonal demands is an activity that requires econometrics, regression, and trend statistical analytics software, and this will not be demonstrated in this course. Rather, an aerial perspective of the key elements needed to create a forecasting starting point for VNUs is the knowledge provided.  

Exploring Forecasting Best Practices

For an accurate forecasting model to occur, university administrators cannot reply on broad current-year trend variables such as personnel costs, student aid expense, and student and grant revenue at the universitywide level to predict year-end results. Again, university administrators should run an analysis of the actual operating conditions to ensure all variables are captured since each unit of analysis (i.e., school level) has different key drivers. Adopting best practices for forecasting will evolve as the process is repeated and refined to best suit the university's needs (in-text citation). Below are four best general practices to consider when getting started!

1. Review the identified key drivers for your operational conditions

2. Be Realistic

3. Collaboration

4. Level of Detail 

5. Technology

Other proactive tips! 

• As your university grows, so do demands on various suppliers, which may exceed the capacity of the supply system in place. Always be on the lookout for emerging evidence of supplier overload & supplier power behavior. Give thought to managing suppliers in accordance w/ your own demands by assisting them as necessary so they can continue to support you and the university's objectives.