Discover Google Sheets Forecast Function: Easy Guide for Beginners

Predicting trends and values is a crucial application of financial data analysis. Google Sheets, like most spreadsheet processors, includes several financial analysis tools.

In fact, for data forecasting based on current trends, Google Sheets offers various tools. Some of these tools include:

• The FORECAST function
• The TREND function
• The SLOPE function (which predicts any y value given an x value)
• Trendlines in Google Sheets charts
• Third-party extensions

In this tutorial, we will cover the Google Sheets FORECAST function. We will show you how to use this function to analyze a set of known x-y values and project trends to predict an unknown y value for a given known x value.

What does the Google Sheets FORECAST function do?

The FORECAST function in Google Sheets predicts future y values based on a set of known x-y values. The function uses linear regression to determine the relationship between the known x and y values.

Thus, this function can be used to predict values such as future market trends, stock needs, or sales growth.

For example, a common application of the FORECAST function is sales forecasting. The function helps calculate anticipated measures of how sales are likely to increase in response to certain frequent business initiatives in the market.

So, if you have historical monthly sales data, where the month is in one column (known x values), and the corresponding sales amount is in another column (known y values), then the FORECAST function can be used to predict the likely sales amount for a given month in the future (assuming a linear relationship between time and sales amount).

The function uses historical sales data to identify trends and then projects those trends into the future. This helps us gain insights, understand how certain measures will translate into future sales and expenses, and ultimately make informed decisions.

Syntax of the Google Sheets FORECAST function

The syntax of the FORECAST function in Google Sheets is as follows:

=FORECAST(unknown_x_value, known_y_values, known_x_values)

Here,

• unknown_x_value is the value on the x-axis that we want to forecast.
• known_y_values is the range or array representing the set of dependent values.
• known_x_values is the range or array representing the set of independent values.

The FORECAST formula takes the sets of x and y values along with the known x value (which does not exist in the known x values) for which we want to calculate the corresponding y value.

It returns the possible y value corresponding to the value in the first parameter after performing linear regression on the values in the second and third parameters.

Example to understand how to use the FORECAST formula for Google Sheets forecasting

Let’s take an example to understand how the FORECAST function can be used in Google Sheets.

Consider the following dataset, which contains historical monthly sales data from the previous year (2020). Column A contains the months, and column B contains the monthly sales for each month.

If we represent this data on a linear graph, it will look like this:

As we can see from the above graph, our monthly data has a linear upward trend, and there are no outliers.

Note that you can view the trendline for this data. To insert a trendline, simply click on the chart, click on the hamburger icon, and select “Edit Chart.” In the chart editor, go to “Customize” -> “Series” and check the box next to “Trendline.”

Since the data appears to have a linear relationship, it is possible to apply linear regression.

We will apply the FORECAST formula to this data to forecast the revenue for February 2021.

In other words, we want to predict the sales amount (y value) for the x value located in cell A14.

Type the following formula into cell B14 and press Enter:

=FORECAST(A14, A2:A13, B2:B13)

The FORECAST function will return the forecasted sales for February 2021 as follows:

Points to remember about the FORECAST function

The FORECAST function can provide invaluable information and insights. However, there are a few points to keep in mind when using the function:

• Make sure there are no outliers in the data before applying the FORECAST function.
• If the x value is not numeric, the function will return a #VALUE! error.
• The variance between the known x values must be nonzero. Otherwise, the function will return a #DIV/0! error.
• The columns of known x and y values must have the same size. Otherwise, the FORECAST function will return a #N/A error.

That being said, you should take the predictions made by the Google Sheets FORECAST function with a grain of salt as they are not always definitive or exact. The function simply deduces possible outcomes based on the observed relationship between the known variables.

It does not account for unforeseen variances or the possibility of trends changing due to external forces. So, use the Google Sheets forecast function as a simple guide but make sure to verify the forecasts before making any definitive decisions.

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