Costs should include items like utilities, insurance, permits, taxes, lease expenses, employee pay, licenses and materials. Liabilities should include items like lines of credit and loans. Create the first part of your pro forma financial statement which projects the company's future net income.
To do this, you'll use the estimated revenue projections from step one above and the estimated cost and liability projections from step two above. Create the second part of your pro forma financial statement which identifies how the company's proposed business change will influence net cash if it gets implemented. Estimating the cash flow differs from finding the net income in step three above because with accrual accounting some expenses and revenues might get recognized after or before money gets exchanged.
Pro forma statements of income, pro forma cash flow statements and pro forma balance sheets are other types of pro forma statements. You can use templates, spreadsheets and financial programs or calculate them by hand. Here are some details on how to use each type:. It is not a good idea to compare pro forma statements from different companies. Each company's methods, definitions and assumptions for creating their pro forma statements are unique.
Comparing pro forma figures across multiple companies is unlikely to create an accurate comparison unless you are acutely aware of how each company created their pro forma statements. A pro forma invoice is a precursory bill of sale that is sent to buyers before they receive a delivery or shipment of products.
The pro forma invoice often gives details about and a description of the products that were purchased along with other important information like transport charges or shipping weight.
The purpose of a pro forma invoice is typically to provide enough information for customs to calculate the duties for the included products. Find jobs. Company reviews. Find salaries. Upload your resume. Sign in. Career Development. What is pro forma?
What is a pro forma financial statement? Why is it important to know pro forma? Types of pro forma accounting. How to calculate pro forma statements. Collect revenue projection data. Collect cost and liability data. Find out how GoCardless can help you with ad hoc payments or recurring payments.
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What is the purpose of a pro forma statement? All in all, the process of preparing a pro forma balance sheet is much the same as preparing a normal balance sheet. The same holds true for the process of preparing income statements and cash flow statements. It differs when you begin forecasting various line items and calculating how those projections impact your bottom line. The true value of pro forma statements goes beyond the numbers they show. These reports provide key stakeholders, investors, and creditors the foresight needed to make decisions and strategically plan.
Managers and individual contributors can also benefit from creating pro forma statements, enabling them to understand different factors impacting business units.
Remember: There are limitations to pro forma financial statements. Rather, they can inform decisions using hypothetical data based on historical trends. Taking an online course like Financial Accounting can help you understand how to create and interpret different kinds of financial statements so you can find meaning in them.
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