Forecasting Practices in Accounting, Law, and Medical Professions
Peterson, Robin, Jun, Minjoon, The Journal of Business Forecasting Methods & Systems
Accounting firms are more tuned to forecasting needs than law and medical doctor companies... by and large, forecasts are prepared for the entire company and not for any specific unit ... most of these professionals use subjective techniques for preparing forecasts.
Forecasting is, of course, a vital and extensively used tool in virtually all business firms today. It is normally employed as an essential component of all of the planning and control processes by manufacturers, retailers, wholesalers, service firms, and others. Very few managers would attempt to conduct their businesses without the assistance of wellconceived forecasts.
A similar situation exists in professions such as accounting, law, medicine, architecture, dentistry, advertising agency practice, and related fields. In many cases, those who work in these fields lack training and experience in forecasting. Their education, background, and frame of reference is primarily in the profession such as medicine - in which they work, rather than in business activities. Given this framework, how extensively do they use forecasts? And how is forecasting employed?
It can be argued that professionals need forecasting as much as do other profitseeking organizations. Certainly, effective planning and control necessitates accurate forecasts. In spite of the need for flexibility in most of the professions, plans are needed to direct future operations in all areas of the business, including marketing, finance, production, and human resource management. Also, controls are required to furnish benchmarks and indicate when policies and procedures should be altered. If these processes are not carried out, professionals can easily fall victim to the inefficiencies and lack of effectiveness that plague many professionals.
Most professionals, of course, lack the forecasting resources that other firms possess. Often professionals do not have expertise in forecasting and are not able to employ individuals with this capability. Computer software used for forecasting purposes may not be available. In addition, professionals often lack sufficient time to become familiar with forecasting, as they are occupied with their professional duties. Further, professionals, due to their orientation toward their work, may not be appreciative of the usefulness of forecasting.
This study inquired into the forecasting practices of three groups of professionals, accounting, law, and medical firms. It considered the degree to which forecasting was employed, who did the forecasting, types of forecasts, time periods used, and the accuracy attained.
Five graduate student interviewers conducted telephone interviews with a randomly-selected sample of 750 professionals (250 accounting firms, 250 law firms, and 250 medical firms). They contacted 1,298 firms from the yellow pages of a group of cities chosen to provide wide geographic coverage of the United States (Los Angeles, Seattle, Denver, Dallas, Miami, Cleveland, Minneapolis, Chicago, New York City, Pittsburgh, and Boston. From these contacts, the interviewers were able to attain the target sample of 750 (a response rate of 57.8%). Potential respondents were selected and, if they were unwilling or unable to participate in the study, replacements were randomly selected.
The interview guides for the interviewers were pretested on a sample of 45 professionals (15 accounting, 15 law, and 15 medical firms). The interviewees were the top managers of their respective firms.
The respondents were asked: "Do you prepare each year a forecast of future revenue?" The results appear in Table 1. Almost two thirds of the accounting firms prepare forecasts. Conversely, only slightly over half of the law and medical doctor companies prepare forecasts. In total, 60.4% of the respondents prepare forecasts. This demonstrates some belief in the value of forecasting. …