# ACCURACY BY FORECAST HORIZON
## Understanding 1-Month vs 6-Month Accuracy

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## 🎯 **KEY CLARIFICATION**

**"75% accurate" refers to DIRECTION ACCURACY, not dollar accuracy!**

- **Direction Accuracy (75%)** = Correctly predicts inflow vs outflow 75% of the time
- **Dollar Accuracy (MAE)** = Average error in dollars (e.g., $1.36M)
- **Percentage Accuracy (MAPE)** = Average error as percentage (e.g., 30.7%)

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## 📊 **1-MONTH PREDICTION ACCURACY**

### Direction Accuracy: **75%**
**Meaning:** Out of 4 weeks, the model correctly predicts **inflow vs outflow 3 out of 4 times** (75%)

**Example:**
- Week 1: Predicted IN, Actual IN ✅
- Week 2: Predicted OUT, Actual OUT ✅
- Week 3: Predicted IN, Actual OUT ❌
- Week 4: Predicted IN, Actual IN ✅
- **Result:** 3/4 = **75%** direction accuracy

### Dollar Accuracy: **$1.36M MAE**
**Meaning:** On average, forecasts are off by **$1.36M per week**

**Example:**
- If actual = $5M, forecast is typically within ±$1.36M
- If actual = -$3M, forecast is typically within ±$1.36M

### Percentage Accuracy: **~30-35%** (when |actual| > $1M)
**Meaning:** When cash flow is significant (>$1M), error is about **30-35% of actual value**

**Example:**
- If actual = $10M, forecast is typically within ±$3-3.5M
- If actual = -$5M, forecast is typically within ±$1.5-1.75M

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## 📊 **6-MONTH PREDICTION ACCURACY (Estimated)**

### Direction Accuracy: **~55-60%**
**Meaning:** Out of 26 weeks, the model correctly predicts **inflow vs outflow about 14-16 out of 26 times** (55-60%)

**Based on degradation pattern:**
- 1 Month: 75%
- 2 Months: 62.5%
- 3 Months: 58.3%
- 4 Months: 62.5%
- **6 Months (extrapolated):** **~55-60%**

### Dollar Accuracy: **~$2.0-2.5M MAE** (Estimated)
**Meaning:** On average, forecasts are off by **$2.0-2.5M per week**

**Based on degradation pattern:**
- 1 Month: $1.36M
- 2 Months: $1.73M
- 3 Months: $1.90M
- 4 Months: $1.91M
- **6 Months (extrapolated):** **~$2.0-2.5M**

### Percentage Accuracy: **~35-40%** (when |actual| > $1M)
**Meaning:** When cash flow is significant (>$1M), error is about **35-40% of actual value**

**Based on degradation:**
- 1 Month: ~30-35%
- **6 Months:** **~35-40%** (slightly worse)

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## 📈 **ACCURACY DEGRADATION SUMMARY**

| Forecast Horizon | Direction Accuracy | Dollar Accuracy (MAE) | Percentage Accuracy* |
|------------------|-------------------|----------------------|---------------------|
| **1 Month** | **75%** ✅ Excellent | **$1.36M** ✅ Good | **~30-35%** ✅ Good |
| 2 Months | 62.5% ✅ Good | $1.73M ✅ Good | ~32-37% ✅ Good |
| 3 Months | 58.3% ⚠️ Fair | $1.90M ✅ Good | ~33-38% ✅ Good |
| 4 Months | 62.5% ✅ Good | $1.91M ✅ Good | ~34-39% ✅ Good |
| **6 Months** | **~55-60%** ⚠️ Fair | **~$2.0-2.5M** ⚠️ Acceptable | **~35-40%** ⚠️ Acceptable |

*Percentage accuracy = Threshold MAPE or Direction-Aware MAPE (when |actual| > $1M)

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## 💡 **WHAT THIS MEANS IN PRACTICE**

### For 1-Month Forecasts:
✅ **Direction:** 75% chance of correctly predicting inflow vs outflow  
✅ **Dollar:** Typically within ±$1.36M  
✅ **Percentage:** When significant (>$1M), typically within ±30-35%

**Example:**
- Actual = $5M inflow
- Forecast likely: $3.6M - $6.4M (within ±$1.36M)
- Direction: 75% chance it's correct (inflow)

### For 6-Month Forecasts:
⚠️ **Direction:** 55-60% chance of correctly predicting inflow vs outflow  
⚠️ **Dollar:** Typically within ±$2.0-2.5M  
⚠️ **Percentage:** When significant (>$1M), typically within ±35-40%

**Example:**
- Actual = $5M inflow
- Forecast likely: $2.5M - $7.5M (within ±$2.5M)
- Direction: 55-60% chance it's correct (inflow)

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## 🎯 **KEY TAKEAWAYS**

1. **Direction Accuracy ≠ Dollar Accuracy**
   - 75% direction = 75% chance of correct sign (inflow/outflow)
   - NOT "75% accurate" in dollar terms

2. **Accuracy Degrades Over Time**
   - 1 Month: 75% direction, $1.36M error
   - 6 Months: ~60% direction, ~$2.0-2.5M error
   - This is **expected behavior** for time series forecasting

3. **Use Multiple Metrics**
   - **Direction Accuracy:** How often sign is correct
   - **MAE:** Dollar error (most reliable)
   - **Threshold MAPE:** Percentage error (when significant)

4. **For Business Reporting:**
   - **1 Month:** "75% direction accuracy, ±$1.36M average error"
   - **6 Months:** "~60% direction accuracy, ±$2.0-2.5M average error"

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## 📊 **VISUAL SUMMARY**

```
FORECAST HORIZON ACCURACY
=========================

Direction Accuracy:
1 Month:  ████████████████████ 75% ✅
6 Months: ████████████████     60% ⚠️

Dollar Accuracy (MAE):
1 Month:  ████████████          $1.36M ✅
6 Months: ████████████████      $2.0-2.5M ⚠️

Percentage Accuracy (when >$1M):
1 Month:  ████████████          30-35% ✅
6 Months: ██████████████        35-40% ⚠️
```

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## ✅ **CONCLUSION**

**Your understanding is correct, but let's clarify:**

- ✅ **1 Month:** ~75% direction accuracy (correctly predicts inflow/outflow)
- ✅ **6 Months:** ~60% direction accuracy (correctly predicts inflow/outflow)

**But also remember:**
- Dollar accuracy: $1.36M (1-month) vs ~$2.0-2.5M (6-month)
- Percentage accuracy: ~30-35% (1-month) vs ~35-40% (6-month)

**All metrics show gradual degradation over time, which is normal for forecasting!**