Forecast profit and loss account: example

The analysis and evaluation of the financial performance of the company, based on accounting reports, is an extremely important procedure, but planning and forecasting further profit are equally important in this case. All the data that ultimately results from such an analysis, as well as conclusions based on these data, are taken in the process of forecasting profits to the extent that any evaluation is based on past and present experience.

Thus, the current accounting data allows you to understand trends, identify any "bottlenecks", and determine the appropriate resources and reserves that can be used to further optimize the company's profits. It is for this reason that it is important to be able to properly write a report on profits and losses. An example of such a document you can see below and, based on it, already draw up your documents.

Basic concepts

Financial planning is based on forecasting and understanding the company's future future, as well as understanding what the company's goal is in the current as well as the long-term perspective. The management of the company should correctly understand what financial transactions should be used in order to obtain the results interesting for them. In most cases, such an assessment of the future performance of the company is expressed in a business plan, one of the elements of which is the forecasting of further cash flows, as well as a profit and loss account. The example includes management plans, as well as the financial condition of the enterprise in numerical terms.

Based on the forecasting of future cash inflows, a preliminary profit and loss statement can be drawn up, the example of which uses the forecast made for it, since it allows you to determine the significant financial transactions in the future. However, a competent forecasting of the report requires obtaining the maximum possible amount of detailed information, because you should not forget that the total profit directly depends on a number of elements, and should be based on a detailed analysis of all important components. As the main components, you can name the total amount of costs and revenues, but do not forget that changes in one element can ultimately significantly affect the net profit.

How is forecasting carried out

Forecasting of profit is carried out taking into account all existing financial conditions of the company, as well as its current financial status. As discussed above, when a profit and loss account is prepared, the example should include any details, including:

• Volume and price of borrowed funds used in the process of financing the work of the company;
• How efficiently and fully the assets of the enterprise are used;
• From what sources does the company intend to receive financing for conducting its core business in the near future;
• Is there a need to build up its assets?
• What is the dynamics of net working capital?
• and much more.

Management must understand how risky is the company's capital structure, and whether it creates restrictions on the freedom of action from the position of encumbrance with too high interest. Also, do not forget about whether such a financial structure affects the independent active leadership position, and whether it can eventually lead to insufficient solvency in the forecast period. In addition, when analyzing a profit and loss account, the example should also include studying the external conditions that affect the financial result of the company's operations.

Forecasting by external users

Forecast the company's financial statements can also be external users, from the perspective of which the forecast can be built according to an alternative scenario. Thus, the analysis of the profit and loss account, an example of which will be compiled by such specialists, can also show other environmental influences, as well as the growth rates of sales that are different from those that were laid in the initial forecast. All this is due to the fact that external users can use several other logical models in the process of making their forecasts, and also have access to a whole range of specialized information data related both to the work of this enterprise and to the work of its counterparties.

Forecasting sales volumes

Forecasting sales volumes is a key point in the process of how the profit and loss account of the store (example) or any other enterprise is compiled. In order to conduct a preliminary assessment, the forecast can be implemented as a percentage increase to this indicator for the previous year. The volumes of sales can be planned and predicted, based on more accurate and detailed calculations.

This kind of forecasting begins with an extremely detailed analysis of the trends that have developed over the long years of the company's work, as well as the reasons for the various changes. The next step in forecasting is to identify possible prospects for the subsequent development of the business activity of the company, which are estimated from the position of the already created portfolio of orders, as well as the structure of the products used and changes in it. In addition, the market, competitiveness and financial capabilities of the enterprise are also taken into account. Based on this, forecasting of sales volumes is already implemented, and the accuracy of this procedure plays an extremely important role in how correctly the example of the decision of the profit and loss statement will be created. The presence of an unrealistic estimate of the volume of sales can ultimately lead to the depreciation of all other forecast reports, since the various separate elements from which the profit is formed directly depend on the volume of sales of the given enterprise.

Another important indicator, from which the company's profit is formed, is the cost of its products or services. In the process of such forecasting, it is also possible to calculate in parts in the expected volume of sales, taking into account the expected or formed profitability. In this case, the income statement of the LLC, an example of which will be considered below, uses a calculation that depends on the price factor. At the same time, we should not forget that cost and price can have different tendencies that do not coincide with each other, so that when estimating the cost price, it is preferable to use more accurate methods of measuring it.

In addition, the profit and loss account of the IP (example) and other types of business can be built using a system of flexible on-farm budgets. In this case, it is envisaged to use the sales volume budgets in value and in kind, and also use the budgets for overheads and commercial costs, production costs and many others, formed by the responsibility centers. Already on their basis, a budget for income and expenditure is being developed, and it will be possible to draw up a profit and loss account, an example of which will be indicated later. It is for this reason that it is important to understand how different forecasting methods are used and how to apply them in a complex.

Purpose of reporting

Recently, the profit and loss account of IFRS is becoming more and more widespread, the example of which allows obtaining loans from foreign banks, is used in the process of concluding contracts with leasing companies, as well as for a number of other financial works. In spite of the fact that in itself the forecasted reporting represents rather conditional concept, it reflects intentions of the company in the plan of the further business dealing, that is visually shown by the business plan drawn up by a management. It is for this reason, taking as a basis the STS profit and loss account (the example below), one can speculate on how various actual deviations from the plan at this stage of development can influence the company's financial performance in the future.

Providing competent forecasting reporting is an extremely important element of financial analysis. The theory of the study of economic activity, which is based on the use of coefficients, is quite widely known to date, but the traditional approaches to conducting financial analysis of accounting in Russia, when the standard set of coefficients is used, in the majority of cases, do not give a full picture of the state Affairs, as the analysis is carried out not the consolidated financial statements, as well as assets often reflect actual costs incurred com AANII. It is for this reason that so-called international reporting is used, which is a much broader field in terms of analysis, but it also requires the use of specific analysis tools.

Features

Basically, forecasted reports are compiled based on the current budget system or business plan. In this case, the starting point in this case is the actual reporting for the most recent reporting date. Small enterprises mostly prefer to make only the budget of cash flows, however, even based on it, you can eventually make detailed forecasted statements.

In the event that the company uses a well-developed system of budgets, the forecast balance is most likely already at the moment one of the components of this system, since it is possible to plan balances of finance for a specific date, as well as stock balances or the value of receivables. In this case, the methodology, according to which the profit and loss statement will be executed (example below), already passes directly into the sphere of responsibility of specialists in the field of budgeting. Thus, the amount of activity is distributed in the process of preparing the report.

What approaches can be used

In the majority of cases, those programs through which budgeting is conducted are also used to generate a profit and loss account for an enterprise (for example, Excel). However, it is worthwhile to consider several principles for preparing forecasted reports based on the cash flow budget, which include flows for:

• Investment activity;
• Operating activities;
• Financial activities.

How each thread is used

Here is an example of filling in a profit and loss statement:

It is necessary to build on the flows of operating activities. So experts can make a forecasted profit and loss account (example above). Flows on investment activity make it possible to form an extremely accurate forecast of possible changes in non-current assets in the balance sheet, while flows for financial activities provide the opportunity to create a forecast of changes in articles for any financial investments, as well as loans and credits in the forecast balance sheet.

In order to make the forecast balance, you need to get information about the forecast of further tax payments, as well as reimbursement of taxes, including VAT, property taxes, profits and many others, which includes an example of filling out a profit and loss account. To calculate the profit tax, the forecasted value of profit should be used, so that in order to make a forecast balance, you must have a forecasted profit and loss statement.

The approaches used to compile the forecast balance are individual for each individual company, and the forecast balance model includes the planning models of its various articles. Next we will consider examples of forecasting some of the most important articles.

Forecast of receivables

In the process of forecasting receivables as a basis, this value is used in accordance with the latest reporting. In order to ensure correct forecasting, a professional technical analysis of accounts receivable is used in previous reporting periods, and a cash flow budget dependent on the specifics of the company's work is applied. If forecasted reports are compiled via Excel, then the best use is the use of a summation model based on a certain characteristic, after which it will be possible to enter various forecasting indices into this model by posting, based on a double entry.

The forecasting index is the product of the average seasonality index and growth index for each individual quarter. Sales forecasting is carried out by multiplying the actual sales conducted during the base quarter of the reporting year by the established forecasting index.

In order to predict the growth rate of revenue, a model should be used that takes into account several factors, the main ones being the following:

• Natural market growth;
• The effect of increasing sales due to used advertising;
• Use of a reserve of production capacities;
• Influence from competing companies that can displace the product from the market;
• The dynamics of market prices.

Each such factor must be predicted separately, and for it you need to make up your own model. Such information is taken in the relevant structural units of companies, as well as from external sources. Among other things, you can order professional research from specialized research companies that deal not only with a holistic forecast of the market, but also with forecasting the share of each company in this market and the calculation of a number of other indicators.

Forecast of increase of cost

The forecast of the increase in the value of fixed assets is determined in accordance with the investment plan from the compiled budget of cash flows. Depreciation of fixed assets should be accrued in accordance with the methods that were adopted in the course of the company's operations. If a linear method is used, for simplicity, you can use the depreciation of the previous period, and then adjust it to the estimated depreciation value due to various receipts or disposals of the main financial assets.

These are just a few important factors from a whole series, so if you want to thoroughly understand the features of creating such reports, you should learn to use all the tools.