Answer to Question #68438 in Accounting for lisa

Question

How does revenue forecasting affect the rest of the budget process?

What are the limitations of revenue forecasting technique?

How can this be countered?

Answer 1

Forecasting revenues necessary to determine the horizon of business development. Projected revenues the possible volume of idle costs and profit.
2. Restrictions revenue forecasting methodology: uncertainty behavior distortions and costs.
3. It can be countered:
- to reduce uncertainty should use flexible budgets.
- to avoid behavioral biases budget process must reconcile with the director. This will ensure fairness budget data and contribute to the objectives of the organization. Another way - the recognition of the concept of variability and interdependence budget will assess performance.
- to reduce costs necessary to prepare the budget on a regular basis.