How To Calculate Forecast Accuracy in Excel or Sheets
Introduction
Forecasting is an essential part of any business, but how do you know how accurate your forecasts are? In this blog post, we will show you how to calculate forecast accuracy in Excel or Sheets. We will also discuss why it is important to track forecast accuracy and how to improve your forecasting skills.
Why it's Important
Forecast accuracy is important for a number of reasons. First, it can help you to make better decisions about resource allocation, inventory management, and pricing. Second, it can help you to identify areas where your forecasting process can be improved. Third, it can help you to build trust with stakeholders who rely on your forecasts.
Calculating Forecast Accuracy in Excel or Sheets
There are a number of different ways to calculate forecast accuracy, but some of the most common methods include:
- Mean Absolute Error (MAE): The MAE is the average of the absolute differences between your forecasts and the actual results.
- Mean Squared Error (MSE): The MSE is the average of the squared differences between your forecasts and the actual results.
- Mean Absolute Percentage Error (MAPE): The MAPE is the average of the absolute percentage differences between your forecasts and the actual results.
To calculate any of these measures, you will need to have a spreadsheet that includes your forecasts, the actual results, and the dates for which the forecasts were made. Once you have this data, you can use the following formulas to calculate the MAE, MSE, and MAPE:
- MAE:
=AVERAGE(ABS(A2:A10 - B2:B10))
- MSE:
=AVERAGE((A2:A10 - B2:B10)^2)
- MAPE:
=AVERAGE(ABS((A2:A10 - B2:B10) / B2:B10) * 100)
In these formulas, A2:A10 represents the range of your forecasts, B2:B10 represents the range of the actual results, and ABS() is a function that takes the absolute value of a number.
Summary
Calculating forecast accuracy is a simple process that can provide valuable insights into the effectiveness of your forecasting process. By tracking your forecast accuracy over time, you can identify areas where you can improve your forecasting skills.
