Pro forma income statement or how to do it

Download the Excel template! Learn even more ⟶ Monthly income statement

The new year brings a lot of new business plans and projects, carried out in the hope of achieving a successful financial year. Since establishments and startups would start creating new plans to boost their businesses in 2018, there will be various advancements in the market sector as well as the increasing rate of competition among them.

In every business, it is important to have a fixed goal, centered on increasing revenue each month or year, however, the business can be. Businesses collapse due to lack of income and adequate plans made to successfully accomplish a financial project.

Therefore, you must remember that:

• Maintaining good financial records as well as tracking all business transactions prevents “financial mishaps”
• It lets you know where exactly a financial problem is most likely to occur and how best to prevent it
• In this way, errors and losses are unlikely to occur.
• And this is one of the ways that trading experts track their trades. This has been the norm for ages in all spheres of the business world.

Keeping in mind the points above, keep in mind that as time passes, leading to our world’s advancement in technology, better ways to maintain records of business transactions evolve. And the proven methods always help save businesses big and small.

A great example is various financial statements that help show:

• Commercial transactions
• Sales and losses
• Income obtained during a specific period

On the other hand, pro forma financial statements show an adjusted report of an establishment’s financial activities by considering all the money earned by the business and excluding losses.

Importance of pro forma financial statements

It is clear today how important the pro forma financial statement is in business transactions.

Download the Excel template! Learn even more ⟶ Annual income statement

But let’s look deeper:

• It helps to track the financial activity of a company
• It takes into account the profits of a business as opposed to the losses
• It is useful for planning future business transactions
• It shows the value of transactions in business

From the points stated above, the projection of future trading results is strongly reflected in a company’s Pro Forma report. Also, financial organizations that are willing to engage in business transactions with other companies or startups require such documents. It would show the expected final effect after the end of the project.

This financial document would show the future summarized in a company’s business profile. Therefore, its importance should not be underestimated. Here are steps that will help you prepare your pro forma Financial Statements!

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