What are the most effective ways to forecast budget needs?

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Forecasting budget needs is a crucial skill for public administrators, as it helps them plan, prioritize, and allocate resources effectively. However, forecasting is not an exact science, and it involves many uncertainties, assumptions, and challenges. How can public administrators forecast budget needs more accurately and efficiently? Here are some of the most effective ways to do so.

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Dr. Amgad Abdel Aal

Doctorate Of Business Administration (DBA) Arab Academy for Science, Technology and Maritime Transport.

1 Identify the purpose and scope

Before starting to forecast budget needs, public administrators should identify the purpose and scope of their forecast. For example, is the forecast for a specific program, project, or service? Is it for a short-term or long-term period? Is it for a baseline or a scenario analysis? Answering these questions can help public administrators define the objectives, boundaries, and assumptions of their forecast, and avoid confusion and inconsistency.

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Dr. Amgad Abdel Aal

Doctorate Of Business Administration (DBA) Arab Academy for Science, Technology and Maritime Transport.
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To have effective budget planning you have to: 1-Analyze the historical data, understand the trend, the reasons for that exposure, in addition to the effect of seasonality and exceptional occasions. 2-Understand the management strategy for the future. 2-Asking each department to provide their expectations for the coming year. 3-Gathering and consolidate the relevant data. 4-Compare the first draft with the management strategy. 5-Communicate the draft by department and arrange for one to one meeting to review and challenge the figures. 6-Re-assess the forecast with the new outcomes. 7-Send the new version to management to review and approve. 8-Commuincate the approved version to each department to get their commitment for the budget.

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2 Gather relevant data and information

The quality of the forecast depends largely on the quality of the data and information used to support it. Public administrators should gather relevant data and information from various sources, such as historical records, current trends, external factors, stakeholder feedback, and expert opinions. They should also verify, validate, and update the data and information regularly, and address any gaps or discrepancies. Moreover, they should use appropriate tools and methods to organize, analyze, and present the data and information clearly and coherently.

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Babar Khan Javed (???? ??? ?????)

MCIPR - Public Affairs | Investor Relations | Crisis Comms
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Credit goes to Khyzar Danish at Z2C for patiently teaching me this. You first select a forecasting period. This depends on the availability and quality of data, the sustainability of the revenues or expenditures to be forecasted, and the degree of accuracy sought. In the stability utopia ( /s ) of Pakistan, this model has to lean very pessimistically. You must then identify evidence of nonstationary nonlinear paths, such as exponential growth, quadratic paths, and cyclical variations. We must factor in changes in economic conditions, population size, citizen demand, government policies, and administrative procedures.

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3 Choose a suitable forecasting technique

There are many forecasting techniques available for public administrators, ranging from simple to complex, from qualitative to quantitative, from deterministic to probabilistic. The choice of the forecasting technique depends on several factors, such as the availability and reliability of data, the level of detail and accuracy required, the time horizon and frequency of the forecast, and the resources and skills available. Some of the common forecasting techniques are trend analysis, regression analysis, time series analysis, scenario planning, and simulation modeling.

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Babar Khan Javed (???? ??? ?????)

MCIPR - Public Affairs | Investor Relations | Crisis Comms
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The forecasting method selected depends on the nature and type of revenue - new or recurring, assets sold, or grants. Have a 3rd party evaluate estimates to ascertain their reliability and validity. You want your efforts directed with the full application of foresight science. Checking how reliable a prediction is sensitivity analysis 1. Tweak the numbers: Change the important factors used to make the prediction a little bit. 2. See what happens: Do those small changes make the prediction change a lot, or just a little? 3. If the prediction changes a lot: It's probably not very reliable. 4. If the prediction stays pretty steady: It's more likely to be accurate. -

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4 Incorporate feedback and adjustments

Forecasting is not a one-time activity, but a continuous process that requires feedback and adjustments. Public administrators should solicit feedback from various stakeholders, such as managers, staff, clients, partners, and auditors, on their forecast assumptions, methods, results, and implications. They should also monitor the actual performance and outcomes of their activities, and compare them with their forecast expectations. Based on the feedback and the performance data, they should make adjustments to their forecast as needed, and communicate them to the relevant parties.

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5 Document and report the forecast

The final step of forecasting budget needs is to document and report the forecast in a transparent and accountable manner. Public administrators should document the forecast process, including the purpose, scope, data sources, techniques, assumptions, results, feedback, and adjustments. They should also report the forecast to their superiors, peers, and subordinates, as well as to external stakeholders, such as legislators, regulators, funders, and beneficiaries. The report should highlight the main findings, recommendations, risks, and uncertainties of the forecast, and provide evidence and rationale for the budget decisions.

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6 Here’s what else to consider

This is a space to share examples, stories, or insights that don’t fit into any of the previous sections. What else would you like to add?

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What are the most effective ways to forecast budget needs?

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1 Identify the purpose and scope

2 Gather relevant data and information

3 Choose a suitable forecasting technique

4 Incorporate feedback and adjustments

5 Document and report the forecast

6 Here’s what else to consider

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