Quantitative Financial Forecasting Methods: The 3 Types


Forecasting serves an essential purpose in any business aiming to make profits. It allows you to plan for your company’s future and determine how changes will affect your bottom line. There exist quantitative and qualitative forecasting methods for businesses.

Accounting services for small businesses mainly use quantitative techniques in forecasting. These methods depend on historical data to predict your business’s future growth and outcomes.

Here are the different types of quantitative financial forecasting techniques used in business settings:

Time-Series Forecasting

In this technique, data is collected over a given period and used to identify the financial trends. Examples of time-series forecasting methods include the rule of thumb, smoothing, and decomposition. Rule of thumb simply copies historical data without any alterations while smoothing uses average results; therefore, evening out all irregularities in your historical data. Decomposition breaks it down into cyclical, trend, irregular, and seasonal components and forecasts each component separately.

Causal Methods

These forecasting techniques presume that the items being forecasted have a cause and effect connection with other variables. The variables might include interest rates, customer confidence levels, disposable incomes, and levels of unemployment. For forecasts on variables with interest, this method uses data from the time-series method. The common causal forecasting method used is regression analysis.

Proforma Financial Statements

These statements use costs and sale figures from the preceding years after excluding specific one-time costs. Proforma financial statements are typically used in acquisitions and mergers. They are also used when requesting capital from investors when forming a new company.

While these quantitative financial forecasting techniques might appear simple, they are complicated when handled manually. They take up significant time and are prone to gross financial errors, which might cost your company big. Getting forecasting software to manage your job is the best way to ensure the accuracy of your forecasts.

How to Make Low Mortgage Interest Rates Even Better

Home and Garden

One of the best reasons to buy a property now is the affordable mortgage interest. It may increase moderately in 2018 after dropping to all-time lows for years, but it will still make home ownership within reach for a while. But even if interest rates these days are generally good, you can still make them better. Here are the best tricks to do it:

1.Get Your Credit Score as High as Possible

Credit scoring remains the number one indicator of creditworthiness in any lender’s book. Before you contact the best mortgage company in Utah, Texas, or any state you live in, call credit reporting companies first. If your credit score is lower than 740, make the necessary improvements to put yourself in a better position to negotiate for lower rates.

2. Keep the Term Short

Experts would attest that the interest rates of 15-year, fixed-rate loans are about 1/4 to 3/8 percent lower than those of 30-year, fixed-rate mortgages. Shorter terms are less risky to lenders because they collect higher monthly repayments, which help pay off the interest faster.

If you plan to move after a few years, though, a hybrid loan program — a mix of fixed- and adjustable-rate mortgages — might be for you.

3.Borrow Less

The larger the sum you put down, the less money you have to borrow. A smaller loan size might compel your prospective lender to provide you with a better rate. Moreover, you can get rid of the private mortgage insurance if your down payment is at least 20% of the property’s cost.

4. Pick a Single-Family Home

The last real estate crisis saw the condominiums depreciate more than single-family houses. Lenders like to have low-risk assets to absorb low losses in case of another housing market crash.

The best way to negotiate with a mortgage lender is to think like one. Your ability to empathize can be your ticket to your dream home and save you thousands of dollars.