AAT L4 CFST Forecasting Techniques Key Terms

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Budget

Example: A company creates a budget for office expenses for the next 12 months.

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A financial plan prepared in advance to guide future activities.

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Forecast

Example: Forecasting next year’s sales using this year’s figures and adjusting for a new product launch.

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An educated guess about future outcomes, based on past data and expected changes.

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A close approximation based on available data, used when exact figures are unknown.

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Estimate

Example: Estimating monthly electricity costs based on last year’s bills.

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A plan of expected cash receipts and payments over a period of time.

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Cash Budget

Example: A retail business prepares a cash budget showing expected cash income from sales and cash outgoings for wages and rent.

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Statistical Techniques

Example: Using moving averages to predict sales trends in seasonal businesses.

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Methods used to improve the accuracy of forecasts using patterns and data trends.

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Data

Example: Daily sales totals collected from tills before being summarised.

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Raw facts or figures that haven’t yet been processed into meaningful information.

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Data that has been processed or analysed to give it meaning.

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Information

Example: A chart showing monthly sales trends created from raw daily sales data.

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Internal Data

Example: Last year’s sales reports, payroll records, or inventory levels.

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Data that comes from within the business itself.

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Data that comes from sources outside the business.

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External Data

Example: Market reports from government websites or competitor price lists.

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Validity (of data)

Example: A company avoids using a 2018 market report to forecast 2025 sales due to poor validity.

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How accurate, relevant, and up-to-date data is for the current purpose.