proforma business plan template

Pro Forma Business Plan Template & Financial Statements

Written by Dave Lavinsky

What are Pro Forma Financial statements?

A pro forma business plan is simply another name for a business plan. The term “pro forma” specifically means “based on financial assumptions or projections” which all business plans are. That is, all business plans present a vision of the company’s future using assumptions and projections. “Pro forma” most specifically refers to the financial projections included in your plan, as these are entirely based on future assumptions.

Pro forma financial statements are a type of statement that provides estimates or financial projections for a company. They are often used by businesses to plan for upcoming periods or quarters, assess new opportunities, or track progress against goals.

Why include a Pro Forma Statement in your Business Plan

A pro forma statement is important for your business plan because it gives investors and lenders an idea of your company’s potential financial health. They use your pro forma statements in determining whether to invest in your company or not. Among other things, they consider the likelihood your company will achieve the financial results you forecast, and their expected return on investment (ROI). Your pro forma financial statements also help you to identify and track key financial indicators and metrics over time.

Writing a Pro Forma Business Plan

When writing a pro forma business plan, you will need to include information such as your company’s sales forecasts, expenses, capital expenditure plans, and funding requirements. You should also include a pro forma income statement, balance sheet, and cash flow statement.

Importance of a Pro Forma Income Statement in Business Plans

The pro forma income statement is a crucial financial tool that can be used to assess the viability of your business. It shows a company’s expected revenue and expenses over a period of time and can help you to identify potential problems early on.

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Types of pro forma statements in business plans.

There are several types of pro forma statements, including the income statement, balance sheet, and cash flow statement.

Pro Forma Income Statement

A pro forma income statement is an estimate of your company’s financial performance over a period of time. It shows your expected revenue and expenses and can be used to assess the viability of your business.

Example 5 Year Annual Income Statement

Pro Forma Balance Sheet

A pro forma balance sheet is an estimate of your company’s financial position at a specific point in time. It shows your assets, liabilities, and equity, and can be used to assess your company’s financial health.

Example 5 Year Annual Balance Sheet

Pro Forma Cash Flow Statement

A pro forma cash flow statement is an estimate of how your company’s cash flows over a period of time. It shows your expected cash inflows and outflows and can be used to assess your company’s financial health and ensure you never run out of money.

Example 5 Year Annual Cash Flow Statement

Pro Forma Income Statements for a Business Plan

Pro forma statements for a business plan can take many different forms, but they all typically include information on sales forecasts, expenses, capital expenditure plans, and funding requirements. A pro forma statement that is included in a business plan template should also include financial projections and break-even analysis. 

Cash Flow Statements and Pro Forma Income Statements

The main difference between a cash flow statement and a pro forma income statement is that a cash flow statement shows your actual cash inflows and outflows, while a pro forma income statement shows your estimated future financial performance. For example, if you make a sale today, it will be considered revenue in your income statement. But, if you don’t receive payment for that sale for 90 days, that would be reflected in your cash flow statement. A cash flow statement can help you to manage your finances effectively, while a pro forma income statement can help you to assess the viability of your business.

Pro Forma Statements and Budgets

Pro forma statements and budgets are both financial tools that can be used to track the progress of a business. However, there are key differences between them.

A budget is a plan for how you will use your resources to achieve specific goals. It shows your expected income and expenses and can help you to stay on track financially.

A pro forma statement estimates your company’s future financial performance. It shows your expected revenue and expenses and can be used to assess the viability of your business.

Both pro forma statements and budgets can be useful tools for businesses. However, budgets are more focused on short-term planning , while pro forma statements are more concerned with long-term financial planning.

Business Plan Pro Forma Template and Example

The following is an example of a pro forma business plan:

Executive Summary

In this pro forma business plan, we forecasted our company’s sales, expenses, and capital expenditures over the next three years. We also estimated our funding requirements and outlined our plans for growth. Our pro forma income statement shows that we are expected to have positive net income each year of the forecast period. Our pro forma balance sheet shows that we will have a strong financial position, with increasing equity and minimal debt. Lastly, our pro forma statement predicts healthy cash flow throughout the three-year period. We believe that these results demonstrate the viability of our business and its potential for long-term success.

Our company is XYZ, a leading provider of ABC products and services. We have been in business for 10 years, and our products are sold in over 10 countries. We have a strong track record of financial success, and we are now looking to expand our operations into new markets. In order to do this, we need to raise $5 million in funding.

Business Plan Pro Forma

In this section of the business plan, we will provide pro forma statements for our company’s sales, expenses, capital expenditures, funding requirements, and cash flow. These statements will demonstrate the viability of our business and its potential for long-term success.

Sales Forecast

We forecast that our sales will increase by 20% in each year of the forecast period. This growth will be driven by our expansion into new markets, as well as our continued focus on innovation and customer service.

Expense Forecast

We expect our expenses to increase at a slower rate than our sales, due to our economies of scale. We anticipate that our expenses will increase by 15% in Year 1, 10% in Year 2, and 5% in Year 3.

Capital Expenditure Forecast

We forecast that our capital expenditures will increase in line with our sales, at a rate of 20% per year. We plan to invest heavily in research and development, as well as new product launches.

Funding Requirements

We estimate that we will need to raise $5 million in funding in order to expand our operations into new markets. We plan to use this funding to invest in research and development, as well as to cover the costs of marketing and new product launches.

Cash Flow Forecast

Our pro forma cash flow statement predicts healthy cash flow throughout the three-year period. We expect to have positive cash flow in each year of the forecast period.

This pro forma business plan demonstrates the viability of our company and its potential for long-term success. We have a strong track record of financial success, and we are well-positioned to continue growing our business. Our pro forma statements show that we are expected to generate positive net income, and have a strong financial position and healthy cash flow. We believe that this business plan provides a clear roadmap for our company’s future growth.

A pro forma business plan is an important tool for any business owner. By outlining your sales, expenses, and profit, you can get a clear picture of your company’s financial health and make informed decisions about its future. If you’re not sure where to start, we can help. Our team of experts has created a comprehensive business plan template that will guide you through the process of creating your own pro forma business plan. So what are you waiting for? Get started today and ensure your company’s success tomorrow.

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Pro Forma Financial Statements (with Templates and Examples)

Bryce Warnes

Reviewed by

Janet Berry-Johnson, CPA

April 21, 2022

This article is Tax Professional approved

Pro forma definition

According to Merriam-Webster , “pro forma” means:

• Made or carried out in a perfunctory manner or as a formality
• Based on financial assumptions or projections

I am the text that will be copied.

Pro forma is actually a Latin term meaning “for form” (or today we might say “for the sake of form, as a matter of form”).

When it comes to accounting, pro forma statements are financial reports for your business based on hypothetical scenarios. They’re a way for you to test out situations you think may happen in the future to help you make business decisions.

There are three major pro forma statements:

• Pro forma income statements
• Pro forma balance sheets
• Pro forma cash flow statements

Pro forma statements look like regular statements, except they’re based on what ifs, not real financial results. As in, “What if my business got a $50,000 loan next year?” Your pro forma statements for that scenario would show what your income, account balances, and cash flow would look like with a $50,000 loan.

Since pro forma statements deal with potential outcomes, they’re not considered GAAP compliant . This is because GAAP compliant reports must be based on historical information.

Pro forma statements don’t need to meet the strictest accounting standards , but must be clearly marked as “pro forma” and can’t be used for things like filing taxes. Using pro forma statements that aren’t marked as such to misrepresent your business to investors, the IRS, or financial institutions can be penalized by the Securities and Exchange Commission).

However, pro forma statements are still extremely useful. They can help you make a business plan, create a financial forecast, and even get funding from potential investors or lenders.

Different but related: you can send clients pro forma invoices to let them know how much their order would be if they placed it today.

Why create pro forma statements?

Creating pro forma statements for future scenarios can help you:

• Get financed, by showing lenders or investors how you would use their money to sustainably grow your business.
• Plan for the future, by considering best, worst, and most likely case scenarios in detail.
• Anticipate changes that may affect your business as it grows, such as entering a new tax bracket.

For these purposes, pro forma statements are typically created as a part of a financial forecast in financial accounting. Big corporations who have in-house accountants use pro forma statements for financial modeling and forecasting different scenarios.

Pro forma statements vs. budgets

It may be tempting to think of a pro forma statement as the same as a business budget . After all, you create both in anticipation of the future. And both help you plan how you’ll use your money. But budgets and pro forma statements are two distinct financial tools.

Think of it this way: A pro forma statement is a prediction, and a budget is a plan. Your budget may be based on the financial information of your pro forma statements—after all, it makes sense to make plans based on your predictions.

For example: Your income this year is $37,000. According to your pro forma annual income statement, your financial projections show it will be $44,000 next year. So, when you create next year’s budget, you can include that extra $7,000—maybe spending $4,000 over the course of the year to pay down the principal on a loan , while adding $3,000 to savings.

Types of pro forma statement

There are four main types of pro forma statements. While they all fall into the same categories—income statement, balance sheet, and cash flow statement—they differ based on the purpose of the financial forecast.

1. Full-year pro forma projection

This type of pro forma projection takes into account all of your financials for the fiscal year up until the present time, then adds projected outcomes for the remainder of the year. That can help you show investors or partners what business finances could look like by the end of the fiscal year.

2. Financing or investment pro forma projection

You may be courting investors or trying to convince your business partners of the value of a capital investment or additional financing. In that case, you can use a financing pro forma projection to make your case. It takes into account an injection of cash from an outside source—plus any interest payments you may need to make—and shows how it will affect your business’s financial position.

3. Historical with acquisition pro forma projection

This type of pro forma projection looks at the past financial statements of your business, plus the past financial statements of a business you want to buy . Then it merges them to show what your financials would have looked like if you made a business combination (or merger) earlier. You can use this scenario as a model of what may happen in the future if you buy the other business and restructure now.

4. Risk analysis pro forma projection

Looking at both best case and worst case scenarios helps you make financial decisions based on challenges you may face in the future. For instance, what happens if your main vendor raises their prices like they did last year? Or how will that proposed transaction of buying new equipment impact you long term? Risk analysis lets you take the future for a test ride, and try out different outcomes.

Pro forma templates

To create a pro forma statement, you can use the same template you’d use for a normal financial statement. You may want to use Bench’s free templates:

• Income statement
• Balance sheet
• Cash flow statement

How to create pro forma statements

The sample pro forma statements below may look different from the statements you create, depending on what your template looks like. But generally, these are the steps you need to take to create them—and the info your pro forma statements should include.

Creating a pro forma income statement

There are five steps to creating a pro forma income statement:

• Set a goal for sales in the period you’re looking at. Let’s say you want to increase your income by $18,000 over the course of one year.
• Set a production schedule that will let you reach your goal, and map it out over the time period you’re covering. In this case, you’ll want to earn an additional $1,500 income every month, for 12 months.
• Plan how you’ll match your production schedule. You could do this by growing your number of sales a fixed amount every month, or gradually increasing the amount of sales you make per month. It’s up to you—trust your experience as a business owner.
• It’s time for the “loss” part of “ Profit and Loss .” Calculate the cost of goods sold for each month in your projection. Then, deduct it from your sales. Deduct any other operating expenses you have, as well.
• Prepare your pro forma income statement using data you’ve compiled in the prior four steps.

One note: your pro forma statements will be much more accurate if your bookkeeping is up to date. That way, when you project future periods, you’re basing it off the reality of your business today.

How Bench can help

To predict the future, you first need to understand the past. With Bench, you get a crystal clear image of your financial history so you can focus on planning your future. We’re America’s largest bookkeeping service helping thousands of business owners better understand the financial health of their operations so they can keep focused on growth and planning. When it comes time to create a pro forma statement, you have reliable numbers and reports to get started. We may not be a crystal ball, but we’re the next best thing. Learn more .

Example pro forma income statement:

Rosalia’s Reliable Recordings

Creating a pro forma cash flow statement

You create a pro forma cash flow statement much the same way you’d create a normal cash flow statement. That means taking info from the income statement, then using the cash flow statement format to plot out where your money is going, and what you’ll have on hand at any one time. This pro forma statement can be part of a larger cash flow forecast used for decision making.

Your projected cash flow can give you a few different insights. If it’s negative, it means you won’t have enough cash on-hand to run your business, according to your current trajectory. You’ll have to make plans to borrow money and pay it off.

On the other hand, if net cash flow is positive, you can plan on having enough extra cash on hand to pay off loans, or save for a big investment.

Example pro forma cash flow statement

Mickie’s Murakami Museum

Creating a pro forma balance sheet

By drawing on info from the income statement and the cash flow statement, you can create pro forma balance sheets. However, you’ll also need previous balance sheets to make this useful—so you can see how your business got from “Balance A” to “Balance B.”

The balance sheet will project changes in your business accounts over time. So you can plan where to move money, when.

Example pro forma balance sheet

Daily Dumpling Deliveries

Once you’ve created your pro forma income statements, and cast your eyes forward to the future of your business, you can start planning how you’ll spend your money. It’s time to create a small business budget .

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Mastering Pro Forma Financial Statements: The Three You Need

By Andy Marker | November 26, 2018

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Using pro forma templates can save you valuable time when creating your own pro forma income statements. However, like any template, you need to adjust it to suit your needs.

In this guide, you will learn everything you need to know about pro forma financial statements: what they are, how they’re regulated, how they work with financial modeling, how to create them, and the problems with pro forma projections, statements, and sheets. We’ll show you what variables link the three sheets, along with equations, examples, and a sampling of free, downloadable pro forma templates.

What Are Pro Forma Financial Statements?

Pro forma financial statements present the complete future economic projection of a company or person. Often used to back up a lending or investment proposal, they are issued in a standardized format that includes balance sheets , income statements, and statements of cash flow. “Pro forma” literally means “as a matter of form.” In finance, this matter of form forecasts the future based on the present, using hypothetical budgeting. Pro forma data estimates are built in to show the company’s profits if certain, one-time items are taken out. Anything the company sees as a one-time only expense — or that does not show the company’s representative value — is removed. Instead of tracking the past exactly, such as would be reported in historical income statements, pro forma statements are used to guide big financial decisions, such as the following:

Debt Refinancing : How the short term is affected by refinance options.

One-Time Large Purchases : Purchases such as land or services, and how they affect the budget.

Company Mergers or Acquisitions : Complete as a part of due diligence to assess future business operating prospects and valuation. In startups, this is often a way to find venture capital.

Leases : How big leases, such as buildings or vehicles, will affect the budget with new accounting standards.

You can also use pro forma statements to do the following:

Develop various sales and budget projections.

Assemble results in profit/loss projections.

Translate data into cash flow projections.

Identify the company assumptions about their financial and operating characteristics.

Compare balance sheets.

Perform financial ratio analysis.

Make decisions about marketing, production, research, development, and projects.

Show the financial picture of a company sans a specific program or department may be floundering.

Show a more accurate picture of the company’s finance, as compared to GAAP or IFRS accounting frameworks.

Act as a benchmark.

Motivate your staff.

Used to show company results to investors, pro forma financial statements are often combined with generally accepted accounting principles (GAAP) adjusted statements. Pro forma financial statements are not computed using GAAP and are often called non-GAAP. GAAP-adjusted statements are uniform financial statements guided by rules of the Financial Accounting Standard Board (FASB). They differ from pro forma statements in that they are not projections, but rather historical reports — therefore, they do not consider things like litigation costs, restructuring charges, and other one-time items.

Pro forma analyses are meant to paint a better picture of what is happening with the company, irrespective of one-time events, but considering the specific industry’s standards. In some respects, this type of analysis is a more accurate depiction of the company’s financial health and outlook. Further, organizations may want to develop their pro forma financial statements while they are doing an annual review of their business plan.

Pro Forma Financial Statements and Regulation

The Securities and Exchange Commission (SEC), the United States’ regulator of its stock market, requires pro forma statements with any filing, registration, or proxy statement. They have articles governing the preparation of pro forma financial statements for public companies. These are Regulation S-X Article 11 , and Regulation S-X 8-05 for smaller companies from 17 CFR 210. According to the SEC, pro forma financial statements will be prepared for public companies when something happens that the investors should know, such as in the case of an acquisition, jettison of a business, real estate transactions, roll-ups, spin-offs, changes in accounting principles, changes in accounting estimates, or corrections of previously made errors. Additionally, the SEC may require that pro forma financial statements be submitted when a company is filing for an initial public offering (IPO). This is also true of companies that change tax status from a private, nontaxable company to a taxable C-corporation to file for an IPO. The pro forma financial statements, including pro forma earnings per share calculated, must be submitted. Finally, if substantial changes to the firm’s capitalization (the sum of their stock, debt, and retained earnings) are assumed to change substantially after the offering’s close date, pro forma documents must reflect that.  

A financial forecast may be used in lieu of pro forma financial statements. According to the SEC, this does not take the place of the pro forma balance sheet, but the pro forma income statement may be withheld. The difference is that the financial forecast details the company’s expected results of operations as a single-point estimate or a range. The legal liability of the company may increase upon submitting forecasts instead of pro forma income statements, but the practice may be more relevant for certain businesses.

Not only does the SEC regulate pro forma statements, but the FASB and the AICPA provide directives, especially when there are major changes in the business structure. To evaluate a new or proposed business structure in pro forma documents, these agencies say that the statements must conform with those of the predecessor business. For businesses that are going public and have to transform into a corporation, the predecessor business may not contain items relevant to a corporation, so the following adjustments must be made:

State the owners’ salaries as officers’ salaries.

Recalculate the federal taxes of the predecessor business as though it were a corporation.

Include corporate state franchise taxes.

Add the partner capital balance to the contributed capital instead of to retained earnings through pooling of interests.

Consider making pro forma provision for taxes that would have been paid if the company was a corporation in the past.        

For businesses that previously acted as a partnership or sole proprietorship that are being acquired into a corporation, the statements must reflect that of the acquiring business. This includes that business’ net sales, cost of sales, gross profit on sales, expenses, other income and deductions, and income before taxes.

If a business is acquiring a new business or disposing part of its business, the pro forma statements need to adjust the historical figures to reflect this, and to show, in the case of an acquisition, what a corporation would have looked like separately, but added together. If possible, show a five year projection of the businesses together. There’s no need to include overhead costs. For the effects of the business combination, only show the current and immediately preceding periods.

Financial Modeling Based on Pro Forma Projections

Since pro forma financial statements and financial projections are quite similar, they may be considered synonymous. However, financial projections can be built from nothing for a startup company, using specific industry-specific assumptions. By contrast, pro forma financial statements are based on current financial statements and change based on events and assumptions. In other words, pro forma financial statements start from real financial data.

Compiled pro forma financial statements can form the basis for calculating financial ratios and financial models, which test assumptions and relationships of your company’s plan. You can use them to study how changes in the price of labor, materials, overhead, and the cost of goods affect the bottom line. Use these models to test the goals of a company’s plan, provide findings that may be understood, and offer better, more accurate data than other methods. New financial models use computer programs that has made this testing better, which enables quick calculation for real-time decision making.

Industries That Use Pro Forma

Industries that use pro forma as a concept, whether for financial statements or not, include the following:

Accounting : Pro forma financial statements are compiled for other companies to show the health or true picture of an organization when the GAAP statements are insufficient. Companies are cautioned against using pro forma to obscure GAAP statements.

Business : There are many uses in business for pro forma financial statements. Anytime a transaction is scheduled, such as a merger, acquisition, capital investment, or change in capital structure, pro forma is used as a projection. The pro forma shows the projected cash flow, net revenues, or taxes expected. The business plan will include pro forma financial statements that show the effect of the proposed change, project, or new business. Some banks require pro forma statements to verify cash flow prior to issuing a line of credit.

International Trade : When used in international trade, pro forma invoices are a declaration to customs authorities about the details of the transaction. A pro forma invoice is a precursory bill of sale for buyers that is sent before the delivery of goods or services. The statement is a binding agreement, not just a quote, although the terms may be subject to change. The sale price is often precise and includes commissions, fees, taxes, and shipping costs, and benefits the buyer, so that they are not exposed to major changes during the final transaction. The invoice is not a demand for payment or a bill. In the U.S., a commercial invoice must follow a pro forma invoice for customers within 120 days. Sometimes the use of these pro forma invoices is referred to as “on a pro forma basis.”

Use this Excel pro forma invoice template to create your own pro forma invoices.

Download Pro Forma Invoice Template

Excel | Smartsheet

Law : In legal terms, pro forma means something that satisfies minimum requirements. Pro forma court rulings are made as formalities to facilitate the legal process.

Engineering : Pro forma drawings and templates are used to make agreements with customers and to project the financial basis of projects

Government : In Commonwealth systems, pro forma bills are first drafts of legislation that go through the reading stage. They are symbolic of the parliament’s right to discuss matters aside from those mandated by the head of state. They do not go further than the first reading. Pro forma bills are found in the United Kingdom, Canada, and Australia. In the United States, pro forma sessions are brief meetings of the Senate or House of Representatives. No votes are taken, and no legislative business is generally conducted during a pro forma session. Often, these sessions are held to ensure that both chambers of Congress uphold their requirement to meet every three days during a congressional session. Another reason these may be held is to ensure that the president does not make any recess appointments.

Problems with Pro Forma Analysis

Even though pro forma statements are meant to show a more accurate picture of the business’ profitability, there are many ways to manipulate the documents to give a more favorable representation, as there are no universal guidelines for their compilation. The following details are often left out of the pro forma:

Depreciation

Amortization

Restructuring and merger costs

Interest and taxes

Stock-based employee pay

Losses at affiliates

One-time expenses

Many of the items listed above are part of the GAAP, but not included in pro forma reporting, making it rife for possible deception. This discrepancy is part of the reason the distinction between pro forma and GAAP financial statements is important. Sometimes, in pro forma documents, unsold inventory is even excluded. Not all these things should be left off, but the decisions of what is left off should be well thought out and explained to potential investors, so they have a clear indication of what they are viewing. Knowing how the pro forma documents are compiled and what is left out is also critical when comparing different pro forma statements. Understanding this methodology and the decisions behind it will enable accurate comparisons and information to investors.

Be advised that issuing pro forma financial statements to the public can be problematic, especially since the pro forma statements and the GAAP statements can vary so widely.  Investors should be cautious when evaluating these types of statements because they present a considerably more favorable picture of the business.

Documents in Pro Forma Financial Statements

There are three main documents in pro forma financial statements: balance sheets, income statements, and statements of cash flow. Of the four main financial statements, only the statement of changes in equity is not used in pro forma. Further, the other three main financial statements are amended to project for the specific scenario, making them pro forma.

For publicly-held companies, the SEC requires an introductory paragraph showing the proposed transactions, the company, the period covered, and what the pro forma information describes. The SEC also requires the pro forma balance sheet, pro forma income statement(s), and explanatory notes that provide adjustment justifications and pertinent detail. The statement of cash flow is not required. The pro forma financial information should be presented in columns and show the condensed historical amounts, the pro forma adjustments, and the pro forma amounts. GAAP-conforming financial statements must be included with pro forma submissions.

Pro Forma Income Statement

Pro forma income statements , also called pro forma profit and loss (pro forma P&L), are projections based on your past income statements. Regular income statements, sometimes called statement of financial performance , are exacting, in that they reflect the exact income figures your company had in past years. The pro forma income statements considers past data, but its projections reflect the addition or subtraction of events or things. These statements are vulnerable to inaccuracies and changes.

Pro forma income statements usually project a minimum of three years, whereas regular income statements may just be the year prior or based upon a lender’s request. According to the SEC, when required for public companies, pro forma income statements are required for the fiscal year, but not for interim periods. However, for all regular income statements presented in a filing, there must also be a pro forma statement. Use this pro forma income statement template to create your own. This form may also be used for corporate retail or wholesale companies.

‌ Download Pro Forma Income Statement Template

Pro Forma Balance Sheet

A pro forma balance sheet is a comparison of a business’ assets and liabilities. It provides a snapshot in time of the company’s finances. The pro forma part of the balance sheet is a projection that looks ahead, assuming certain things will occur. Pro forma balance sheets are difficult to compile, but banks generally ask for them and they are important for showing your potential financial picture. They can show the projection of what money will be tied up in receivables, equipment, and inventory. Further, they can represent if your company could run out of money, and how much is necessary to keep it afloat. If your company has a high debt-to-equity ratio, it will show on the balance sheet. Use the balance sheet template below to create your own balance sheet. This pro forma balance sheet can also be used for corporate retail or wholesale businesses.

‌ Download Pro Forma Balance Sheet

According to the SEC, for public companies, a pro forma balance sheet should have the same dates, plus one year from the last submitted balance sheet. If interim period balance sheets were submitted, the company should pick up from where they left off. If it is an annual period, the document should also align with the company’s filed GAAP-approved financial statements.

Often, the difference between a past balance sheet and a pro forma balance sheet is that the pro forma balance sheet reports additional periods, sometimes even interim figures. Public companies that prefer to use a condensed combined balance sheet can use this template to create their own condensed balance sheet. A normal balance sheet covers two years, but it is reasonable for a pro forma balance sheet to cover four years of operations.

Download Public Company Pro Forma Balance Sheet Template

Pro Forma Statements of Cash Flow

Statements of cash flow , or cash flow statements , measure the sources of a company’s cash and how it uses that cash over the stated period. Pro forma statements of cash flow estimate how much cash inflow and outflow is expected in one or more future periods. Often requested by banks, they may also be prepared as a part of the annual budgeting or forecast and estimate where cash shortages may occur in order to obtain additional funding. In the case of estimated cash overages, the company can produce a plan for investment. Arguably, the statement of cash flow is the most important of the pro forma documents. If the pro forma balance sheet and income statements lead to a statement of cash flow that shows inadequate funds for what management has planned, the other documents will be invalid and may need to be reworked.  

There are several methods to prepare a pro forma cash flow document, relative to the forecasting periods:

Short Term : A cash flow statement that represents a period of weeks, based on outstanding invoices and cash payments for existing accounts payable. This is considered the most accurate forecast.

Medium Term : Estimate the revenue from things that have not been billed yet by using the order backlog and the cash receipts for the next few months. The expenses from this time are also translated into cash payments.

Long Term : Budgeted revenue and expenses are translated to payments, costs, and cash receipts. This is the least accurate projection.

In the annual averages, the figures should not vary significantly. However, the information is affected by outstanding estimated days of sales, or the average number of days that payment has not been made by the customers. The closer the projection is to the actual numbers reported, the more accurate it is. Further, if a company has a stable order backlog, the pro forma statement of cash flow is more accurate. Having knowledge of short-term sales sources help as well. Finally, and regardless of its relative accuracy, a pro forma statement of cash flow forces management to think about the future expected cash flow and whether it is enough.

Use the templates found here to create your own cash flow statement forecast. Change the dates and time periods to reflect the projection you need to create. This form may also be used for corporate retail or wholesale companies.

The Introductory Paragraph

If your company must produce an introductory paragraph with its pro forma documents, it should describe the content of your pro forma documents. This means that it should define the transaction, the entities involved, and the periods of time. In this paragraph, you should offer a high-level explanation of the limitations and assumptions the pro forma documents were produced under. For example, if your company recently acquired or dispensed with another company, the assumptions would be the changes in finance expected. The limitations should discuss the challenges of predicting the financial future of a company.

Explanatory Notes

The assumptions behind these adjustments should be explained in the explanatory notes, and the explanatory notes should be referenced in the column the adjustment is made. Explanatory notes are used to add explanations or more information in financial documents that explain the content. (These are put into the explanatory notes, or sometimes listed as references, because they would make the main content too long or awkward to read.)

Pro Forma Earnings Per Share

Pro forma earnings per share (EPS) are calculated by dividing a firm’s net income (and any adjustments) by its weighted shares outstanding, plus any new shares issued due to an acquisition. These are changes to the expected results of operations. This metric determines the financial outcomes of any acquisition or merger and tells the parent company whether the transaction will be accretive (good) or dilutive (bad) to the financial state of the company. Pro forma EPS are calculated in the pro forma income statement, but the figure is also used in the pro forma balance sheet and the pro forma cash flow statement, when necessary. According to the SEC, when the dividends from stock exceed or are planned to exceed the current earnings, the EPS must be calculated. The SEC assumes that that proceeds from any additional shares will be used to fund dividends.

Pro Forma Adjustments

When your financial statements are put into pro forma financial statements, you adjust material charges, credits, and tax effects to the transactions. In other words, you get an idea of what your financial results would have been if the event had already occurred. These are factually supported by the data from the original financial statements.

It is important to disclose how the adjustments are made on pro forma financial statements. Below is the guidance that the SEC offers about making the adjustments:

Directly Attributable : Each adjustment on the financial statements must precisely correlate to the transaction or event from the original financial statements, and then describe how it is changed.

Continuing Impact on the Registrant : The SEC assumes that any adjustments to the financial statements reflect changes that are not temporary. The goal is to find the stream of earnings from core operations, which can be used to forecast. The adjustments you make for forecasting must impact your company for a minimum of one year. Non-recurring events, such as a one-time, big order for goods should be placed in the pro forma balance sheet as an adjustment to the retained earnings, but would be inappropriate in the pro forma income statement. In other words, you need to point out that the event or purchase is not a trend and therefore, that you cannot forecast based on it.

Factually Supportable : In order to consider adjustments, you must provide existing, factual documentation, such as contracts, letters of intent, or completed transactions. For example, management’s plans to revamp the business section and their estimated costs may not be considered factual support. Letters of intent from vendors for this project may be considered factual evidence.

Getting Auditors Involved

Even public companies are not required to get their pro forma document audited by an independent auditor, according to the SEC. However, to comply with professional auditing standards, the documents can be audited at the request of the company or a third party. The SEC guides auditors to ensure that they do not take on too much responsibility for the company’s claims. Whether in an assurance that the company is financially sound, also known as a comfort letter , or through a compilation letter, the auditor is only responsible for ensuring  the financial statements are prepared correctly. The auditor is not responsible for whether the statements are accurate and honestly prepared, but rather to ensure that there are no material errors, such as mathematical errors, oversights, inadequate disclosures, and clerical mistakes. The company’s management is responsible for the documents’ overall validity.

Accountants who prepare companies’ pro forma financial statements are bound by certain requirements, as per the American Institute of Certified Public Accountants (AICPA)’s Statements on Standards for Accounting and Review Services (SSARSs). The SSARSs say that the auditor promises no material modification to the historical financial documents and understands that they are simply showing changes to the company’s financial picture based on a transaction or event using adjustments. They must also ensure they label all pro forma information as such, to avoid confusion with historical information, and list the specific assumptions and uncertainties about them they are making.

The conditions accountants take on include the notation that they may be associated with the statements’ outcomes (so they should consider how the information may be used) and to also submit a compilation report alongside the prepared documents. They are warned that they must have the historical financial information (not just condensed information) alongside their preparation, and that those statements should have been compiled, reviewed, or audited.

To ensure everyone is on the same page, the auditor and the organization’s management should write an understanding of the services being provided. These may include the following:

The objective of pro forma documents is to help management present their information.

The auditor is not responsible if the company made material modifications to the finance information.

Management is ultimately responsible for the pro forma information presentation.

Management is responsible for the internal processes used to garner information.

Management is responsible for any fraud.

Management is responsible for the company to obey the law.

Management is responsible for providing all the pertinent information to the auditor.

Management is responsible to ensure that the preparation rules by AICPA are followed.

A compilation is different from a review or audit of pro forma information. The auditor doing the compilation will not render an opinion.

The compilation will not be relied upon to figure out if there has been fraud, errors, or illegal activities.

If any fraud, material errors, or illegal activities are discovered, they may notify management, but are not required to do so if they are not relevant or if the management has already communicated their awareness.

The auditor must report if they are not independent, and the effect that relationship has on their reporting.

Use this Word template to create your own compilation report, as per the AICPA’s guidance.

‌ Download Compilation Report Template — Word

Before an auditor completes a company’s pro forma preparation, they must review the compilation report and consider any material errors and the appropriateness of the reports. Auditors are required to write a compilation report to protect themselves from liability. This report includes the following:

Title : The title should clearly indicate whether the report is a compilation or if the auditor is independent.

Addressee : As appropriate for the company.

Introductory Paragraph : This must include the company identity, that the pro forma information has been compiled, identify the information, specify the date covered, reference the historical financial documents, state that the auditor does not have an opinion of the finance, as well as note the dates of the historical documents (if applicable), and any departures from those statements.

Statement of Management’s Responsibilities : Management, not the auditor, must state that they are ultimately responsible for the outcomes of the pro forma financial statements.

Statement of Accountant’s Responsibilities : The accountant auditor must state that they will conduct the compilation based upon best practices in their industry.

Statement on Compilation Report Objective : This states that there will be no material modifications made to the pro forma statements.

Paragraph on Pro Forma Documents Limitations and Objectives : This is an explanation of the statements’ intent and why they are projections with limits.

Accountant signature : As appropriate.

Report date : As appropriate.

If the accountant is not independent, the report should reflect this. You can address this fact simply with a final paragraph in the compilation reports, and the author may elect to include the reason for the lack of independence. Finally, in each page of the pro forma information, there must be a reference to the compilation report.

How to Create A Pro Forma Income Statement

To start producing your pro forma financial statements, begin with the pro forma income statement. There is a standard approach called “percent of sales forecasting” that gives you the sales or its growth forecast. From there, project the variables with a stable sales relationship using the forecasted sales and the estimated relations. Generically, the income statement includes the following variables:

Sales (or Revenue) - Cost of Goods Sold = Gross Income (or Gross Earnings)

Gross Income (or Gross Sales/Earnings) - Operating Expenses = Operating Income

Operating Income - Depreciation = EBIT

EBIT - Interest Expense = EBT

EBT – Taxes = Net Income (Net Earnings, EAT, Profits)

Whether you start here or elsewhere, sit down with an income statement from the most recent year. Prior to the end of the year, decide how each item on that statement can or should be changed going forward. The final sales and expenses for the current year should be estimated to get ready a pro forma income statement for the following year. Then, do the following:

Calculate pro forma gross profit . You need to consider all the changes that will be coming next year, including new products, promotions, price changes, and new customers. As a simple example, estimate the percent increase you expect for next year’s sales. For example, if you expect a 5% increase in your current sales of $50,000, you calculate $50,000 * 105% = $52,500. Assuming the cost of the item you sell is not increasing, you still need 5% more of the item you sell to meet your goal. Assuming this year’s cost of goods sold (COGS) was $10,000, you will also multiply it by the 105%, so $10,000 * 105% = $10,500. To get the pro forma gross profit: $52,500 - $10,500 = $42,000 (your projected gross profit).

Calculate pro forma total operating expenses . For pro forma expenses, you should consider every line item and whether it can be cut, and then determine the cost projection increase rate for salaries and expenses. If, for example, your salaries and expenses will increase 3% next year, start by adding both the historical salaries and expenses together and then multiplying that sum 103%, or as an example: ($25,000 + $5,000) *103% = $30,900. Your pro forma salaries next year will be $25,750 and your expenses will be $5,150 for a total of $30,900 in pro forma expenses.

Calculate pro forma net income before taxes . Calculate your pro forma profit before taxes by finding the difference between the pro forma gross profit and the pro forma total expenses. Continuing the example: $42,500 - $30,900 = $11,600 (pro forma profit before taxes).

Calculate pro forma taxes . Take your estimated tax rate, such as 20%, and multiply it by the pro forma profit before taxes. This would be $11,600 * 20% = $2,320 is the tax bill.

Calculate pro forma net income after taxe s. In this example, subtract the $2,320 tax bill from the pro forma before taxes profit of $11,600 to give you the pro forma after taxes.  This is $11,600 - $2,320 = $9,280 (pro forma profit after taxes).

There are other stable variables that aren’t influenced by sales on the income statement, including operating expenses, depreciation and amortization, and interest expense. The COGS figure does directly vary with sales; if it does not, something is wrong with your numbers. The COGS forecast is the COGS/Sales ratio from several years multiplied by the sales forecast.

Below is a sample of a filled out pro forma income statement:

‌ Download Pro Forma Income Statement Sample - Excel

How to Create a Pro Forma Balance Sheet

Once your pro forma income statement is completed and you have determined the change in retained earnings, transfer it to the pro forma balance sheet. Expect that the current assets and liabilities will vary directly with the sales variance. For the pro forma balance sheet, the variables include the following:

Accounts receivable

Prepaid taxes

Marketable securities - total current assets

Gross PP&E (property, plant, and equipment)

Accumulated depreciation

Net PP&E

Land - total assets

Liabilities + Owner’s Equity (Assets – all other liabilities) :

Accounts payable

Wages payable

Taxes payable

Current portion – long term debt - total current liabilities

Long-term debt

Preferred stock

Common stock

Retained earnings - total liabilities + equity

Ideally, the pro forma balance sheet is composed in columns. Here are some notes about the pro forma balance sheet variables:

The cash balance is usually calculated using a model and policy decisions.

The changes for Gross PP&E are also made using policy decisions.

The required new financing is often decided upon by the short-term or long-term debt residuals.

The interest expense comes from the interest-bearing debt.

Net income is affected by the interest expense, which also changes retained earnings, which also affects the amount of interest-bearing debt necessary.

How to Create A Pro Forma Statement of Cash Flow

Once you have completed forecasting both your pro forma income statement and your pro forma balance sheet, you can move on to the pro forma statement of cash flow. Start with the beginning balance, or the cash on hand. From there, add total all the cash receipts you have, including the following:

• Customer account collections
• Loan/cash injection
• Interest income
• Other cash receipts

Now, list all the outgoing cash payments. These include adding up all the following, as applicable:

Cost of goods sold (COGS)

Direct product/service costs

Payroll taxes/benefits (direct)

Salaries (direct)

Other variables as they pertain to your business

From here, add up all the operating expenses, including the following:

Account fees

Advertising

Continuing education

Dues/subscriptions

Licenses/permits

Meals/entertainment

Office supplies

Payroll processing

Payroll taxes/benefits (indirect)

Postage/shipping

Professional services

Rental fees

Salaries (indirect)

Subcontractors

Transportation

Web development

Web domain and hosting

Add any additional expenses together, as applicable:

Cash disbursements to owners

Charitable contributions

Interest expense

Income tax expense

Finally, calculate your formulas at the bottom of the sheet to get the sums of the analysis. These include Total Cash Payments, Net Cash Change, and Month Ending Cash Position. To calculate each:

Total Cash Payments = Total COGS + Total Operating Expenses + Total Additional Expenses

Net Cash Change = Cash Receipts – Cash Payments

Month Ending Cash Position = Cash on Hand + Cash Receipts – Cash Payments

Linking the Three Pro Forma Financial Statements

The pro forma income statement and the pro forma balance sheet are intimately linked. The pro forma balance sheet and the pro forma income statement must be forecasted together, not separately. The pro forma income statement displays the effect of a given year, while the pro forma balance sheet shows the situation at both the beginning of and time after that year. Between these two forms, the sheet must balance out. Some of the formulas between the two sheets bridge. These include the following:

Change in retained earnings (from balance sheet) = Net income (from income statement) – Dividends

Interest Expense (from income statement) = Interest Rate (from the balance sheet) * Interest-bearing debt

Some other criteria that cross sheets include the following:

Bank Loans (from balance sheet) goes into the Less interest expense (on the income statement).

Long-term debt (from balance sheet) goes to the Less interest expense (on the income statement).

Change in retained earnings (from income statement) goes to Retained earnings (on balance sheet).

The pro forma income statement equation is:

Change in retained earnings = [Revenue – Operating expenses – Depreciation & Amortization – (interest bearing debt * interest rate)] * (1- Tax rate) – Dividends

The pro forma balance sheet equation is:

Total assets = accounts payable + wages pay + taxes pay + interest bearing debt + common stock + change in retained earnings

For each of the above equations, the interest-bearing debt is the unknown variable.

Finally, you should link each of your three worksheets together. To do so, make sure you do the following:

Add net income from the income statement to the balance sheet and cash flow statement.

Add back depreciation to capital expenditure, which is arrived at on the cash flow statement. This determines property, plant, and equipment on the balance sheet.

The balance sheet and the cash from finalizing are usually affected by financing activities. Interest from financing is shown on the income statement.

The closing cash balance on the balance sheet is the sum of the last period’s closing cash and the current period’s cash from operations, investing, and financing.

Risk Analysis

In creating your pro forma documents, it is advisable to create multiple sets with different scenarios, especially when their purpose is to help make decisions. In this way, your management team (or C-suite) has all the information they need to make informed decisions. If you enable them, they have the best and worst-case scenarios that review the fiscal impact of their decisions and possible ways to mitigate risk. For more information on conducting risk analyses and the free templates to do so, see “ All the Risk Assessment Matrix Templates You Need .” As an example, your team might need to decide between the acquisition of two separate businesses. You could deliver to them two sets of pro forma financial statements, and two risk assessment templates to use to discover their best option.

Download Risk Assessment Matrix Template

Excel | Word | PDF | Smartsheet

Other Types of Pro Forma Financial Statement Templates

There are several other types of templates that could be helpful for a business other than the ones already presented here. There are many different periods that could be covered, as well as the different purposes for the pro forma financial statements.

Historical with Acquisition Pro Forma Template

This projection looks backward (at one or more years) at another company’s financial statements. For the same period(s), it also looks at the business they are acquiring.  Using this combination, the projections shows how they would have done together. This calculation gives you the the net acquisition costs. This type of projection could be shorter term (from the beginning of the current fiscal year). Use this free template to create your own historical with acquisition pro forma documents.

‌ Download Historical with Acquisition Pro Forma Template — Excel

Investment Pro Forma Projection

For cases in which your company is specifically seeking funding, you want to show your potential investors how the company’s financial results will change with their investment. There may be several sets of these pro forma documents, each based on different potential investment amounts, or just one based on what you think you need. For this projection, you need to determine where in your company the investments would be parlayed. This can be either a fairly simple or complex process. For example, you may be able to add the investment onto the balance sheet under the cash row in the historical with acquisition pro forma template, or you may have to divide the investment under multiple rows. Check the templates in this guide to determine which is right for you to create your own.

Additional Terms Related to Pro Forma:

There are several terms to relate to pro forma and the finance concepts around it. These include the following:

Financial or Accounting Ratios : These figures are calculated from financial document figures, and they give a snapshot of a firm’s financial status and enable comparisons to other firms. Below are five frequently used financial ratios:

Debt-to-Equity Ratio : Total liabilities / stockholder’s equity

Current Ratio : Current assets / current liabilities

Quick Ratio : (Current assets – Inventories) / current liabilities

Return on Equity (ROE) Ratio : Net income / shareholder’s equity

Net Profit Margin : Net profit / net sales

• Pro-rata : This term describes a proportionate allocation. Used for dividend payments, insurance premiums, and interest rates, pro rata calculations determine the fractional payment from the whole. For example, in dividend payments each investor is paid according to their number of shares and based on the company’s number of shares outstanding. If the company has 400 shares outstanding at $2 per share, the maximum amount of dividends paid will be $800. The whole is $800. If one shareholder has 201 shares, their dividend will be: (the number of shares / the number of shares outstanding) * the total dividend payment In this case: (201/400) * $800 = $402

Pro bono : This comes from the latin term “pro bono publico,” meaning to work for the public good. It is voluntary work of no cost to the recipient. It often refers to free services from a professional to clients without the financial means to pay for them.

Quid pro quo : This term is a Latin phrase that means “something for something.” It occurs when two participants mutually agree to exchange something for something else. In business, this can take the form of goods, services, or tradable assets. These have also been called “favor for favor” arrangements, and the term can be used to describe unethical behavior such as the exchange of financial backing for political favors.

A quid pro quo contribution : This is a charitable contribution, but with one major difference. In a regular charitable contribution, the donor does not receive anything in return for their donation. In this type of donation, the Internal Revenue Service (IRS) allows the donor to deduct the entirety of their donation that is eligible. In a quid pro quo contribution, the donor receives something for their gift from the charity. The difference between what they have donated and the value of what they receive is the deductible amount. For example, a parent donates $500 at the school charity event to help them start a garden. In return, she receives a $50 gift card to the local grocery store. This is a quid pro quo contribution of which she may only claim $450 of as contributions for the tax year.

Budgeting : The plan created to balance expenses with revenue. The creation of this plan enables people and businesses to know whether they can afford to do the things they need to do and purchase the things they need. Following a budget ensures that people stay out of debt, can save, and pay their bills. Traditional budgets track expenses, payments to eliminate debt, and building an emergency fund as a buffer. Budgets should be compiled and reevaluated regularly.

Interim financial statements : These cover a period of less than one-year, interim financial statements may be issued for quarterly periods or any period. They usually contain the same documents that would be found in an annual statement, such as income statements, balance sheets, and statement of cash follows, and should match by line items. Some interim financial statements may be reviewed, such as in publicly-held companies, but they are not generally audited. Differences between interim and annual financial statements are in the following:

• Disclosures : Some disclosures are not required in interim financial statements, or may be presented as summaries.

Accrual basis : Accrued expenses may be reported within one reporting period or spread over multiple reporting periods. This variance can cause inconsistencies when interim reports are compared and should be defined for reviewers.

Seasonality : Season trends not seen in annual statements may be revealed by interim statements. These may be helpful in seeing seasons of major profit and loss.

Compilation : When financial statements are prepared or compiled by an outside agent, they are referred to as a compilation . The outside agent does not provide auditing or assurance services, just puts the data into financial statements. This type of service is less expensive than review or auditing services.

Notes to the financial statements : Also called the footnotes , and sometimes in the explanatory notes, notes to the financial statements explain how a company arrives at its numbers and any possible irregularities or inconsistencies. These are the details that explain the methodology, what decisions were made, and why to clarify the reports.  

External financial statements : When financial statements are distributed to people or organizations not involved in the company’s operations, they are considered external financial statements . They are often compared to other companies or to previously released external financial statements and follow GAAP. A complete set includes the following:

Income statement

Balance sheet

Statement of cash flows

Statement of comprehensive income

Statement of stockholder equity

Common-size financial statements : Common size financial statements display all the items as percentages of the common base figure instead of as numerical figures, enabling comparisons between different companies or periods. Though most companies do not report in this way as it is not required, this type of reporting decreases bias.

Free Cash Flow Analysis : A free cash flow (FCF) analysis calculates the amount of cash a company can put aside after it has paid its expenses at the end of an accounting period. Free cash flow shows a company’s ability to grow internally give profit back to its shareholders. The formula for assessing free cash flow is: Net cash flow – capital expenditures - dividends OR (Net income + amortization + depreciation + deferred taxes) – capital expenditures - dividends

Variance Analysis :  A variance analysis clarifies the difference between expected and actual results. Analyzing variances can improve operational efficiency. Using budgets as estimates and actual costs, the differences (called variances ) are calculated. The point of variance analysis is to determine if the project or business forecasts were accurate and to adjust based on this knowledge. For more information on cost variance and how to calculate it specifically for projects, see “ Hacking the PMP: Studying Cost Variance .”

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Updated: October 24, 2023 |

What's a pro forma template? [Free pro forma templates for Excel]

Jake Ballinger is an experienced SEO and content manager with deep expertise in FP&A and finance topics. He speaks 9 languages and lives in NYC.

Financial statements provide a snapshot of a company's financial health at any given time.

While financial statements offer a clear view of a business's past or current performance, pro forma statements may give a more informed picture of future performance.

Pro forma financial statements show what a company's financials would look like after a significant event, such as an acquisition or merger. They help businesses budget, forecast, and plan for their financial future. 

Pro forma statements can be complex to understand and calculate, so we’ve provided free templates to simplify the process. 

Download the pro forma templates below or keep reading for a full breakdown of pro forma statements. 

Jake Ballinger

FP&A Writer, Cube Software

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Key takeaways

• A pro forma statement is a forward-looking statement that projects a company's future financial performance sans non-recurring costs (like the cost of acquiring some other business). 
• They include pro forma income statements, pro forma balance sheets, and pro forma cash flow statements.
• Pro forma financial statements help businesses plan for the future by providing a snapshot of their financials under different scenarios.

What are pro forma financial statements?

A pro forma financial statement is a forward-looking statement that projects a company's future financial performance. “Pro forma” is Latin for “as a matter of form” or “as a formality.” 

Pro forma statements help businesses make decisions and plan for the future by providing a snapshot of their financials in different scenarios. Companies often use them to assess their growth potential or obtain financing from investors. 

Pro forma statements can be applied to various financial statements, including income, balance, and cash flow statements.

When do we use pro forma statements?

Pro forma statements are helpful during periods of rapid growth or change. Companies can use them to assess the impact of a proposed merger or acquisition, a new product launch, expansion into new markets, or other future changes. 

Businesses also use them to make significant decisions such as large purchases, real estate transactions, leases, budget or cash flow projections, financial ratio analysis, and profit/loss projections. It can also be an excellent tool for motivating staff by showing them the company's potential future earnings. 

Financial statements vs. pro forma statements 

The SEC defines a financial statement as a formal, written record of the financial activities of a person, business, or other entity. From assets and liabilities to income and cash flow, financial statements allow for a complete picture of the current financial standing of a business. 

Pro forma statements are a specific type of financial statement that focuses on the impact of hypothetical situations on a company’s future revenue, expenses, and profitability. 

Pro forma statements can be misleading since they do not necessarily follow GAAP accounting principles. In other words, they can be made to look rosier than reality. 

Pro forma statement formats

Pro forma statements come in a couple of forms. The most common are the pro forma income statement, balance sheet, and cash flow statement.

Pro forma income statement

The pro forma income statement shows a company’s expected revenue and expenses. It illustrates what a business's income would look like if they exclude certain costs. 

For example, if a business is considering a new marketing campaign, it’ll want to know how it'll affect its bottom line. They could create a pro forma income statement that excludes the costs of the campaign. 

By using pro forma income statements, an organization can get an idea of how profitable the business would be without the campaign expenses.

Pro forma balance sheet

A pro forma balance sheet is a financial statement showing a company’s expected assets, liabilities, and equity after a significant event, such as an acquisition or a new financing round.

An excellent example of using a pro forma balance sheet is if your company considers taking on new debt. You can see how the new debt will impact your company's financial position and make an informed decision about whether to proceed with the loan. After all, interest payments on debt can significantly impact a company’s bottom line. 

Pro forma balance sheets are also helpful for showing the financial impact of proposed changes to your business, such as opening a new location or closing a current location. 

Pro forma cash flow statement

A pro forma cash flow statement shows a company's expected cash inflows and outflows at a specific time in the future. They can be short-term (for daily operations), medium-term (for financial projections), or long-term (for investments or strategic decisions).

You might use a pro forma statement if you want to predict how new products will impact your company's cash flow or if you’re considering switching to a subscription-based business model.

Of course, this is important because cash runway is critical to a company’s ability to continue growing, pay employees, and invest in product development. 

Looking for a pro forma cash flow statement in Excel format? You're in luck.

Click here to download the free Cash Flow Statement: Excel Format. 

Benefits of using pro forma analysis

Pro forma analysis (creating pro forma financial documents like the pro forma balance sheet that show hypothetical scenarios of your business) is a valuable tool for your financial planning and analysis process.

These project

1. Financial planning and forecasting

A pro forma template can give you a clear idea of your company's financial health and a possible future outlook. It can give you a sense of whether your business is on track to meet its financial goals and help you identify potential problems that may arise down the road.

For example, a business might release a pro forma income statement to provide a goal or benchmark for the business to hit. This is called a pro forma projection.

Such a pro forma income statement would be based on a financial forecast . It would consider items like a company's current and future operations, financial documents, net profit, projected cash flow , and overall financial health.

A simple financial modeling exercise is to create pro forma projections to show how your company's capital investment might grow over time.

2. Decision-making

This analysis can help you make informed decisions about investments, marketing strategies, pricing tiers, and other aspects of your business plan.

For this reason, it's a best practice to create pro forma statements as in-depth financial forecasts  to show the possible future states of your business.

Then you can reverse engineer how to get there.

3. Asset and liability management

Pro forma templates can give you insight into allocating business resources and identifying potential risks that may impact your business.

Let's say you’re considering expanding your business by opening a new location. You can use the pro forma template to estimate the costs associated with this expansion and if it's feasible.

This includes the cost of leasing or purchasing a new facility, as well as the cost of hiring new staff. You can also use the pro forma template to estimate the expected revenue from this new location. 

4. Securing investments

Pro forma analysis can demonstrate to potential investors that your business has a great chance of being financially successful in various future situations. 

Investors could also use pro forma analysis to assess the potential return on their investment. Almost every fundraiser needs pro forma statements so that potential investors can understand the implications of the new capital infusion. 

5. Evaluating protective mergers

Companies often decide to merge with the hope that the combined business will be worth more than the sum of its parts. But, not all mergers create value for shareholders, and some can even cause a loss. 

One way to estimate whether a merger will create or destroy shareholder value is to look at the pro forma financial statements and determine if a merger is in the best interests of your business.

Limitations of pro forma analysis

Pro forma analysis is an excellent tool for businesses to get a handle on their financial situation and make informed decisions about their growth. However, there are some limitations to be aware of.

1. Based on assumptions

Pro forma analysis is based on assumptions about the future, such as future sales, costs, and operating expenses. These assumptions may not always be accurate, which can cause misleading results. 

It is also dependent on the information that you input into it. This means that if there are any errors in the data, the analysis will not be accurate.

The Securities and Exchange Commission (SEC) is wary of pro forma statements because they are very much based on assumptions, not generally accepted accounting principles.

2. It may not consider external forces

Another limitation is that pro forma analysis does not consider all factors that can affect a business's financial situation. This means that it may not consider external forces that could impact your business—such as the economy, black swan events (like COVID), or unforeseen changes in the market. 

Luckily,  scenario analysis and sensitivity analysis exist for these situation types.

Pro forma financial statement terms to know

There are a few key terms that you should know when looking at pro forma financial statements.

• Gross margin: The difference between a company's revenue and the cost of goods sold. It’s in the form of a percentage.
• Operating expenses: The costs associated with running a business, such as rent,  utilities, and salaries.
• Net income: The difference between a company's revenue and expenses. It is also in the form of a percentage.
• EBITDA : Earnings before interest, taxes, depreciation, and amortization. It is a measure of a company's profitability that excludes these items.

Conclusion: download our free pro forma statement templates for Excel or Google Sheets

Looking for a pro forma statement template to create your own financial statements? We've got you covered! 

Enter your work email information, and you'll be able to see how your business is performing.

3-statement model pro forma template 

Download it here .

A 3-statement model forecasts a company's future financial performance based on its past performance, intending to predict things like revenue, expenses, and cash flow. It combines three key reports: the income statement, balance sheet, and cash flow statement.

What's inside the 3-statement model template:

This template combines three key reports:

• Income statement: One of the most critical financial statements. It reveals the business's ability to make a profit (and the extent of that profit).
• Balance sheet: When paired with the profit and loss statement, the balance sheet shows how much cash or investment you need to support the sales and profits on the income statement. Net income from the income statement flows into the balance sheet as a change in retained earnings (adjusted for payment of dividends).
• Cash flow: This statement displays the change in cash over a period, along with both the beginning and ending balances for that period in cash.

Your cash flow statement takes net income and adjusts it for non-cash expenses. From there, you can reference changes in the balance sheet to find cash usage and receipt patterns.

Budget vs. actuals pro forma template

What is a budget vs. actuals statement? 

A budget vs. actuals statement is a financial document that compares an organization's budgeted income and expenses to its actual income and expenses. This statement can help organizations track their progress toward their financial goals and identify areas where they may need to make adjustments.

Download it here.

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Pro Forma Financial Statements: A Comprehensive Guide for Businesses

• Banking & Finance
• Bookkeeping
• Business Operations
• Starting a Business

Pro forma financial statements play a crucial role in business planning and decision-making processes. These financial reports are based on hypothetical scenarios, enabling business owners and managers to evaluate potential situations that could occur in the future. By utilizing pro forma statements, companies can project the financial impact of various business decisions, such as launching new product lines, expanding to new locations, or restructuring a department.

Understanding pro forma financial statements involves various components, such as income statements, balance sheets, and statements of cash flow. Each of these elements provides a financial snapshot of a company’s hypothetical future performance. By combining these components, it is possible to create a comprehensive financial projection that can help inform strategic decisions and evaluate the potential return on investment.

Key Takeaways

• Pro forma financial statements help businesses make informed decisions by evaluating hypothetical scenarios
• Components of pro forma statements include income statements, balance sheets, and statements of cash flow
• These statements are essential tools for strategic planning and assessing the impact of various business decisions

Understanding Pro Forma Statements

Definition and purpose.

Pro forma financial statements are hypothetical financial reports that project the future financial performance of an entity, based on expected income, expenses, assets, and liabilities. They are created using assumptions about future values and conditions, which serve to forecast financial performance over a period that has not yet occurred. Their primary purpose is to aid in business planning, investment decision making, and to show the potential impact of a proposed transaction on a company’s financial health.

Significance to Investors

Investors find pro forma financial statements valuable in evaluating a business’s potential for growth and profitability. These statements help investors to:

• Identify trends: Comparing the projected numbers with historical trends can reveal areas of opportunity or concern.
• Assess risk: By reviewing pro forma statements, investors can see how the business may be affected under various hypothetical scenarios, such as changes in the economy, market, or industry.
• Make informed decisions: Investors can use pro forma statements to estimate returns on investment or potential value of a company, and to decide whether to buy or sell securities.

Differences Between GAAP and Pro Forma

Financial statements prepared using Generally Accepted Accounting Principles (GAAP) are based on a company’s historical financial performance, whereas pro forma financial statements focus on future projections. The main differences include:

• Basis of calculations : GAAP financials use historical data, while pro forma financials use forward-looking data.
• Accounting standards : GAAP financial statements follow strict accounting standards, whereas pro forma financial statements may deviate from these standards, relying on a company’s assumptions.
• Usage : GAAP statements are used to assess past performance, make comparisons across different periods, and analyze trends; pro forma statements are used for planning, forecasting, and scenario analysis.

It is crucial to note that pro forma financial statements should be used in conjunction with GAAP-compliant financials to gain a comprehensive view of a company’s health and potential growth.

Components of Pro Forma Financial Statements

Pro forma financial statements are essential tools for businesses to plan and project their future financial performance. These statements are based on assumptions and estimates, helping companies understand the impact of various scenarios on their financial position. The three primary components of pro forma financial statements are the Pro Forma Income Statement, Pro Forma Balance Sheet, and Pro Forma Cash Flow Statement.

Pro Forma Income Statement

The Pro Forma Income Statement, also known as the projected income statement, provides an estimate of the company’s future revenues and expenses. This statement helps businesses plan for growth, identify potential risks, and make informed decisions based on expected profitability. The main components of a pro forma income statement include:

• Revenue : The projected sales generated by the company during a specific period.
• Cost of Goods Sold : The estimated cost of producing or purchasing the products sold.
• Gross Profit : The difference between revenue and cost of goods sold.
• Operating Expenses : The anticipated expenses associated with running the business, including salaries, rent, and marketing.
• Net Income : The estimated profit or loss, calculated by subtracting operating expenses from gross profit.

Pro Forma Balance Sheet

The Pro Forma Balance Sheet provides an overview of the company’s projected assets, liabilities, and equity. This statement helps businesses understand their anticipated financial position and evaluate their solvency and liquidity. The main components of a pro forma balance sheet include:

• Assets : The resources a company expects to own or control, such as cash, accounts receivable, inventory, and fixed assets.
• Liabilities : The obligations a company anticipates incurring, such as accounts payable, loans, and taxes payable.
• Equity : The residual interest in the company’s assets, representing the difference between assets and liabilities. This includes retained earnings and contributed capital.

Pro Forma Cash Flow Statement

The Pro Forma Cash Flow Statement offers insight into the company’s anticipated cash inflows and outflows, enabling businesses to plan and manage their liquidity. This statement presents an estimation of cash flows from operating, investing, and financing activities. The main components of a pro forma cash flow statement include:

• Operating Activities : The cash flows generated from a company’s core business operations, such as sales and expenses.
• Investing Activities : The cash flows associated with purchases and sales of assets, such as property, equipment, or investments.
• Financing Activities : The cash flows related to borrowing, repaying loans, issuing stock, or paying dividends.

By understanding and utilizing pro forma financial statements, companies can make more informed decisions, develop strategies, and improve their overall financial planning and management.

Creating Pro Forma Statements

Forecasting and assumptions.

When creating pro forma financial statements, the first step is to forecast future revenues, expenses, and other financial data based on a company’s past performance and experience. It is important to make reasonable and educated assumptions to provide an accurate projection of the company’s future financial performance. Some common assumptions used when creating pro forma statements include:

• Expected growth rates
• Changes in market conditions
• Alterations in the company’s strategy or operations
• Expected changes in costs or pricing

Preparing Hypothetical Scenarios

In addition to using historical data and assumptions, pro forma financial statements can incorporate hypothetical scenarios. These scenarios provide a range of possible financial outcomes based on various “what-if” situations. For example, consider a software company that plans to launch a new product in six months. The company can create multiple pro forma statements based on different launch scenarios:

• Scenario 1 : The software product has a successful launch, generating significant sales and revenue.
• Scenario 2 : The software product has a moderate launch, with sales and revenue matching current market conditions.
• Scenario 3 : The software product experiences a weak launch, with sales and revenue falling below market expectations.

Creating a variety of hypothetical scenarios can help gain insight into the potential financial impacts of different decisions, risks, and opportunities.

Projecting Future Performance

Once you have established a solid foundation of assumptions and hypothetical scenarios, you can begin projecting future performance using the pro forma financial statements. This process involves utilizing the following statements:

• Pro Forma Income Statement : Estimates future revenues, expenses, and net income.
• Pro Forma Balance Sheet : Reflects the company’s projected financial position, including assets, liabilities, and equity.
• Pro Forma Cash Flow Statement : Showcases expected cash inflows and outflows, helping a company plan for liquidity needs.

The information gathered from each of these statements can help a company make business decisions, secure funding, and drive strategic planning. In summary, pro forma financial statements serve as a valuable tool for forecasting, preparing hypothetical scenarios, and projecting future performance to ensure a company’s long-term financial success.

Analyzing Pro Forma Statements

Financial ratios and metrics.

When analyzing pro forma financial statements , it is essential to use various financial ratios and metrics to evaluate a company’s performance adequately. These ratios can provide valuable insights into the company’s financial health. Key ratios include:

• Liquidity ratios , such as the current ratio and quick ratio, help assess the company’s ability to meet short-term obligations.
• Solvency ratios , such as the debt-to-equity ratio, evaluate the company’s long-term financial stability and its ability to meet long-term debts.
• Profitability ratios , including the gross margin and return on equity (ROE), gauge the company’s earnings relative to its investments and equity.
• Efficiency ratios , like inventory turnover and the accounts receivable turnover, reveal the effectiveness of the company’s assets management.

These ratios, derived from balance sheets and income statements, can be compared to industry benchmarks to understand how the business is performing against competitors.

Evaluating Business Potential

To gain a clear understanding of a company’s potential for future growth, pro forma earnings must be examined in conjunction with the anticipated financial impact of various business decisions. This analysis enables investors and management to:

• Assess the potential profitability of new projects or investment opportunities.
• Estimate the effect of price changes for products or services.
• Evaluate the implications of business expansions—that may involve mergers, acquisitions, or entry into new markets.
• Gauge the potential impact of changes in cost structures, such as modifications in labor costs.

Using tools like forecasting and scenario planning, decision-makers can estimate the organization’s future financial position and determine actionable strategies to optimize performance.

Risk Analysis

An important aspect of analyzing pro forma statements is identifying potential risks that might affect the company’s financial performance. Risk analysis involves evaluating factors that could negatively impact revenue, increase costs, or alter the overall business dynamics. These factors include:

• Market risks: Changes in consumer preferences, increased competition, or market saturation.
• Operational risks: Disruptions in the supply chain, inefficient production processes, or employee turnover.
• Financial risks: Interest rate fluctuations, exchange rate volatility, or changes in credit terms.

A comprehensive risk analysis enables management to make well-informed business decisions and devise contingency plans to minimize the company’s exposure. This, in turn, helps safeguard the organization’s bottom line and ensure a robust financial standing in the long run.

Strategic Use of Pro Forma Projections

Pro forma financial statements are used by business owners and companies for various strategic purposes. These include business planning and budgeting, funding and investment attraction, and mergers and acquisitions.

Business Planning and Budgeting

Companies use pro forma projections to create a detailed budget, forecasting revenues, expenses, and cash flow, which usually span over three to five years. This provides insights into the financial health and growth potential of the business. It helps companies to:

• Make data-driven decisions
• Identify areas for cost savings
• Determine feasible growth strategies
• Allocate resources efficiently

By leveraging pro forma projections, businesses can test hypothetical scenarios and make informed decisions, effectively planning and structuring their financial activities.

Funding and Investment Attraction

Pro forma financial statements are critical in attracting funding and investments for businesses. These projections provide potential investors with a clear understanding of the business’s:

• Future growth potential
• Risk management strategies
• Financial stability

Investment pro forma projections showcase the company’s ability to generate returns on investments, giving investors the confidence to commit their capital. Business owners can tailor these projections to highlight their business’s unique strengths, ultimately appealing to a broad range of potential investors.

Mergers and Acquisitions

In mergers and acquisitions, pro forma financial statements play an important role in revealing the financial impact of a potential transaction. Companies create historical with acquisition pro forma projections that showcase combined financial position of both organizations. This helps in assessing:

• Expected synergies
• Post-acquisition financial performance
• Integration costs

By identifying these financial outcomes, companies can better evaluate the potential benefits and risks associated with mergers and acquisitions, ensuring that the decision to pursue the transaction is well-informed and in line with their strategic goals.

Real-World Application of Pro Forma

Public reporting and the sec.

Pro forma financial statements often play a significant role in public reporting, especially when dealing with the Securities and Exchange Commission (SEC). Companies may use pro forma statements to present their financial results, adjusted for specific events such as acquisitions or divestitures. This provides stakeholders with a clearer understanding of the company’s financial position and helps them make informed decisions.

Key aspects of pro forma financial statements in public reporting:

• Financial forecast based on hypothetical scenarios
• Used for decision-making by investors, creditors, and other stakeholders
• Adjustments for specified events, such as acquisitions

Case Studies of Successful Use Cases

1. Business Expansion:

A company plans to expand its operations by opening a new manufacturing facility. They prepare pro forma financial statements to estimate the impact on future revenue, expenses, and profitability, considering various factors such as initial investment, operating costs, and expected sales. This helps them align their growth strategy and make informed decisions on whether or not to proceed with the expansion.

2. Mergers and Acquisitions:

A company is considering acquiring a smaller competitor. They create pro forma statements combining their own historical financial information with that of the acquisition target. This enables them to better understand the combined entity’s future financial performance and potential synergetic effects.

3. Restructuring:

A company facing financial challenges decides to restructure its operations to improve efficiency. They use pro forma financial statements to analyze different restructuring scenarios, such as cost reduction initiatives, refinancing options, or divestitures. This assists them in evaluating the long-term viability and profitability of their restructuring plan.

Learning from Pro Forma Mistakes

While pro forma statements can provide valuable insights, they can also be subject to misuse or misinterpretation. Fraudulent activities may involve manipulating pro forma results to present a rosier financial picture than reality, potentially misleading investors and other stakeholders.

To avoid such pitfalls and maintain a neutral and clear stance, companies should:

• Clearly disclose the basis of any adjustments or assumptions made
• Ensure the use of consistent methodologies across multiple scenarios
• Conduct thorough sensitivity analyses, incorporating a range of possible outcomes
• Seek guidance from accounting or financial experts, when necessary

By understanding the real-world application of pro forma financial statements and learning from past mistakes, businesses can use these tools effectively to drive informed decision-making and achieve better outcomes.

Limitations and Criticisms of Pro Forma

Potential for misrepresentation.

Pro forma financial statements may present an optimistic picture of a company’s financial health, intentionally or unintentionally, that differs from the reality per Generally Accepted Accounting Principles (GAAP). The adjusted nature of pro forma statements allows management to exclude certain items that they consider non-recurring or extraordinary. This level of discretion opens the door for worst-case scenarios , where pro forma statements might be utilized to paint an overly favorable picture of the company’s performance, potentially veiling fraudulent activities or significant financial issues.

A relevant example of this issue can be observed in cases when companies release pro forma earnings and provide little or no reconciling information, making comparisons with audited GAAP financial statements difficult. Thus, it is essential for decision-makers, such as investors and analysts, to be aware of the potential for misrepresentation in pro forma disclosures and to remain vigilant in their research and due diligence.

Understanding Limitations in Decision Making

While pro forma statements provide valuable insights for companies’ internal management, their usefulness is limited for external decision-making by investors or other stakeholders. These statements often focus on estimates and projections, rather than actual financial data, which can result in an unclear picture of a company’s performance. Furthermore, pro forma statements might not take into account the full range of worst-case scenarios , increasing the risk inherent in making decisions based on these projections.

In order to navigate the limitations of pro forma statements, it is crucial for decision-makers to:

• Understand the basis : Scrutinize the methods used to create pro forma statements, such as non-recurring items excluded or other adjustments made by management.
• Compare with GAAP : Cross-check the pro forma disclosures with audited financial statements, ensuring a more comprehensive and accurate understanding of the company’s financial health.
• Evaluate risks : Assess the likelihood and potential impact of worst-case scenarios not captured by the pro forma statements, incorporating this knowledge into the decision-making process.

Despite their limitations, pro forma financial statements have a place in financial planning and forecasting. However, recognizing their limitations and staying cautious in the decision-making process is key to fully leverage their value while avoiding potential pitfalls.

Legal and Ethical Considerations

Gaap compliance.

Pro forma financial statements should adhere to Generally Accepted Accounting Principles (GAAP) in order to provide accurate and reliable information to investors and other stakeholders. While pro forma statements are used to illustrate the potential impact of a significant transaction on historical financial data, they must still adhere to GAAP requirements, which are designed to ensure consistency and comparability across different financial reports.

For example, when preparing pro forma financial statements, the following GAAP principles should be considered:

• Revenue Recognition : Ensure that revenue is recognized in accordance with GAAP standards, which typically means recognizing revenue when it is earned and realizable.
• Consistency : Apply accounting policies and methods consistently across all financial reports, including pro forma statements, to ensure comparability between different periods and scenarios.
• Conservatism : Exercise caution in making assumptions and estimates when preparing pro forma statements, to avoid overstating potential revenues or understating potential costs.

It is also important to keep in mind that the SEC (Securities and Exchange Commission) requires companies to provide a thorough and compliant pro forma financial information when significant business combinations or real estate transactions occur.

Addressing Fraudulent Pro Forma Practices

As with all financial reports, there is a risk that pro forma financial information could be used for fraudulent purposes. To mitigate this risk, companies should implement certain policies and procedures to ensure the accuracy and integrity of their pro forma statements:

• Internal Controls : Implement robust internal controls over the financial reporting process, including controls related to the preparation of pro forma statements. This may involve segregating duties between those who generate the data for the pro forma statements and those responsible for reviewing them.
• Documentation : Maintain detailed records supporting the assumptions and estimates used in the preparation of pro forma statements. This documentation should be readily available for review by auditors or regulatory authorities when necessary.
• Transparency : Clearly disclose the basis for any adjustments made in pro forma statements, such as one-time charges or non-recurring items. This includes providing a detailed reconciliation between historical financial statements and the pro forma information.
• Oversight : Establish a process for independent review and approval of pro forma financial information by individuals with appropriate expertise, such as an audit committee or external auditor.

In summary, ensuring legal and ethical compliance in pro forma financial statements is crucial to maintain investor confidence and uphold the integrity of financial reports. By adhering to GAAP requirements and implementing safeguards against potential fraudulent practices, companies can produce accurate and reliable pro forma information that effectively illustrates the potential impact of significant transactions on their financial position and results of operations.

Frequently Asked Questions

What is the purpose of pro forma financial statements in assessing a company’s financial health.

Pro forma financial statements provide a hypothetical look at how a company would perform based on a set of credible assumptions about one or more transactions it is contemplating. This enables businesses to evaluate the potential impact of new product launches, expansions, or other strategic decisions, making them essential tools for planning and decision-making.

How do pro forma and traditional profit and loss statements differ?

Traditional profit and loss statements are based on actual financial results, providing an accurate representation of a company’s past performance. Pro forma statements, on the other hand, are based on hypothetical scenarios, such as the impact of a specific business decision or a future event. In essence, pro forma statements are projections, while traditional statements are historical records.

What distinguishes pro forma financial statements from prospective financial statements?

Pro forma financial statements are projections that consider hypothetical situations, such as a proposed transaction or a new product launch. Prospective financial statements, on the other hand, provide a forecast of a company’s future financial position based on current business conditions and expected trends. While both types of statements involve predictions, pro forma statements focus on specific scenarios, whereas prospective statements provide a broader outlook on the company’s potential performance.

Are there specific instances where pro forma financial statements should not be utilized?

Pro forma financial statements are most useful when analyzing potential business decisions or anticipating the impact of future events. However, they should not be used as a substitute for traditional financial statements when assessing a company’s overall financial health or stability. Additionally, pro forma statements can be misleading if based on unrealistic or overly optimistic assumptions, and users need to scrutinize their underlying premises carefully.

Is adherence to GAAP required for pro forma financial statements?

While pro forma financial statements are not subject to the same strict adherence to Generally Accepted Accounting Principles (GAAP) as traditional financial statements, it is essential to maintain transparency and consistency in the presentation and preparation of these projections. Misleading or inaccurate pro forma statements can result in a loss of credibility and trust with stakeholders, making it crucial to approach them with integrity and objectivity.

How do pro forma financials assist in cash flow forecasting and management?

Pro forma financial statements, including cash flow statements, provide insights into a company’s anticipated cash inflows and outflows based on specific business scenarios. This allows management to anticipate potential liquidity issues, evaluate financing options, and make informed decisions regarding cash flow management. In essence, pro forma cash flow statements contribute to strategic planning and help minimize financial risks.

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Ultimate pro forma template for Excel

We’re living in some pretty uncertain times.

Over the past couple of years, supply chains have been totally redrawn, and businesses have been forced to evolve how and where they do business. In some cases, that’s created tremendous new opportunities organizations can leverage to chalk up some growth.

But to seize those opportunities, it’s essential to constantly look ahead. That’s where pro forma templates come in handy.

Pro forma projections are all about looking ahead to try and predict where finances are headed and how hypothetical scenarios could affect the bottom line. Fortunately, there are Excel templates that can help you achieve that — or even smarter solutions (more on this later).

This article will explain what a pro forma template is, share our custom pro forma template for Excel, and how monday.com can be used to boost sales forecasting abilities.

Get the template

What is a pro forma statement template for Excel?

When doing the books for a business, one of the most powerful tools is the “pro forma” statement. Pro forma — sometimes written as “proforma” — is a fancy Latin way to say “for form.” But how does that super ancient phrase in a dying (dead?) language relate to businesses in the 21st century?

In accounting, pro forma statements are a way to test out various business situations that might happen in the future. Looking at how those scenarios could play out makes it easier to prepare if they happen in real life.

A pro forma template helps teams understand what data is needed to model different scenarios based on pre-built questions. It’s as easy as “fill in the blanks,” … but this can still be pretty labor-intensive. There are plenty of pro forma statement templates in tools like Excel, Google Sheets, or even a Work OS like monday.com.

Download Excel template

Why use pro forma statement templates?

Pro forma financial statements look a lot like regular financial statements . The critical difference is that pro forma statements are based on “what-if” scenarios, not actual financial results .

Example: What may happen if a business receives a $150,000 loan? Run a pro forma! Produce a statement to look at how that debt would impact cash flow over a certain period.

Pro forma statements demonstrate to investors and lenders that a company is worth investing in. In addition, it’s easier to prove sustainability by presenting well-researched pro forma statements to a would-be stakeholder.

Likewise, pro forma statements make it easier to anticipate changes that could affect the business — for example, if the tax liability went up due to entering a higher tax rate.

That’s why pro forma statements are important. But why are pro forma templates important?

Simply put: they save a whole lot of time. Unless there is a full-time team of accounts with a lot of time on their hands, developing all of these pro forma templates can be time-consuming. It’s also challenging to know where to start.

A pro forma template means the job is already halfway done. The scenarios are already plotted out in spreadsheet form. All that’s left is to fill in the blanks to make the template unique to the situation.

What are some examples of pro forma statements?

There are 3 significant types of pro forma statements: pro forma income statements, pro forma balance sheets, and pro forma cash flow statements.

1. Pro forma income statements

An income statement is one of the most critical financial statements in every accountant’s toolbox . It’s often referred to as a profit and loss (P&L) statement, and it summarizes all net income, net sales, and expenses over a given period.

( Image Source )

A pro forma income statement starts like an ordinary income statement based on actual financials. But let’s say it’s important to see the impact of a 30% rise in costs (like energy price, rent, or property price). A pro forma means it’s possible to run this hypothetical scenario by inflating all of the items in the expense columns by 30%.

The resulting calculations would show how a rise would impact the company’s net profit.

2. Pro forma balance sheets

A balance sheet is a financial statement showing how much a company is worth according to its “book value.” It does this by listing out all of a company’s assets, liabilities, and owner’s equity for a given date. This date is referred to as a “reporting date.”

Like a pro forma income statement, a pro forma balance sheet would be created by building a balance sheet for a given date based on projected values. For example, create a pro forma balance sheet for 12 months in the future and populate the fields with projected asset values, liabilities, and equity in a year.

3. Pro forma cash statements

It’s used to show the company’s ability to operate in the long term and short term based on existing cash inflows.

A pro forma cash statement makes it easy to see how operating activities would be affected if your cash flows were to increase (or dry up).

Want to create a pro forma template in Excel? The process is straightforward. Start with one of Excel’s pre-built templates and enter all hypothetical numbers.

The trouble with this method is that it’s super manual — which is where monday.com’s Pro Forma Template comes to the rescue.

The monday.com pro forma template for Excel

The monday.com pro forma template is all about helping shake the habit of reactive financial management. With the help of our easy-to-create automations and custom rules, proactively setting up all sorts of hypothetical scenarios will run all day, every day.

Simply import financials and then use the dashboard on the Pro Forma Template to choose various custom scenarios.

This template allows for the following:

• Create pro forma income statements, pro forma balance sheets, and pro forma cash flow statements.
• Easily edit each model; easily change the data to make new predictions. Then, make pro forma adjustments based on new information.
• Generate financial ratios.
• Compare multiple pro forma statements and hypothetical ratios side-by-side to help find opportunities, reduce risk, and increase profits.

Want a more interactive experience than using an Excel spreadsheet , something you can easily update in real-time across multiple team members? Consider using the template for monday.com. Then, benefit from all the other supercharged features a Work OS (operating system) brings. 

Get access to advanced real-time analytics into the cost, project, and task management processes, custom reports, and detailed real-time charts to help the team and other stakeholders visualize budget and project progress.

With permission controls, external stakeholders only can view the template, letting the accounting team change any numbers to avoid accidents.

Related templates

Budget tracking template.

The Budget Tracking Template is another way to get a clear picture of the organization’s spending and forecast how those expenses will impact the bottom line.

Like the Expense Tracking Template, the Budget Tracking Template is fully customizable — add action items, reorder based on priority, and create a tailored plan.

CRM Template

monday.com’s CRM Template isn’t just about pro forma financial projections. It’s an all-in-one solution that helps effectively capture leads, look at future sales and financial ratios, and manage contacts.

It can also easily forecast revenue, generate sales insights, and help determine where to focus finances and goals. Create projections around operating expenses and net sales, effectively manage resources, assign tasks to team members, and communicate with multiple teams in real-time.

FAQs about the pro forma statements

Q: how is a proforma in excel created.

A: Excel comes built-in with several pro forma templates to simply fill in the blanks to streamline the pro forma modeling process.

Creating a pro forma statement in Excel from scratch is pretty straightforward. First, make a typical financial statement, such as a cash flow statement. Then, choose one column to amend with hypothetical figures to match various scenarios.

Q: What is a pro forma Excel sheet?

A: A pro forma Excel sheet is a hypothetical financial statement created in Microsoft Excel. These sheets are essentially ordinary financial statements populated with actual and hypothetical financial figures.

Use these sheets to predict how certain events will impact the business.

Q: Does Google Sheets have a pro forma template?

A: There are several built-in financial statement templates on Google Sheets. Although these statements aren’t labeled “pro forma,” they can be utilized as standard financial statement templates on Google Sheets and then populated with projected figures to run various scenarios.

Several third-party sites offer links to pre-built pro forma templates they’ve designed.

Q: Does Excel have financial templates?

A: Yes. Excel has a range of financial templates, including income statements, cash flow statements, and balance sheets.

Q: Why are pro forma statements important?

A: Pro forma statements help you show investors and lenders how the business would fare in specific financial scenarios.

They also help make better-informed business decisions and prepare for worst-case scenarios by understanding how certain variables impact the company’s operations.

Q: What are the 3 benefits of creating a pro forma?

A: Creating a pro forma leads to 3 key benefits:

• Better understand how various scenarios would impact the business.
• Plan for adverse scenarios so they don’t disrupt operations.
• Attract investors and lenders by demonstrating how sustainable the business model is.

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What Are Pro Forma Financial Statements?

• 28 Oct 2021

When it comes to making business decisions, so much relies on numbers. To get sign-off from key stakeholders, win investors, and strategically plan, you need to demonstrate that your ideas make financial sense.

While certain financial statements —such as balance sheets, income statements, cash flow statements, and annual reports—help provide a historical snapshot of a business’s performance, they often lack the ability to provide foresight when planning for the future. For this reason, professionals typically turn to forecasts and financial projections to guide their plans and answer critical “what if” questions. Pro forma financial statements are a common type of forecast that can be useful in these situations.

Here’s a closer look at what pro forma financial statements are, how they’re created, and why they’re a key aspect of financial decision-making.

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What Is a Pro Forma Financial Statement?

A pro forma financial statement leverages hypothetical data or assumptions about future values to project performance over a period that hasn’t yet occurred.

In the online course Financial Accounting , pro forma financial statements are defined as “financial statements forecasted for future periods. They may also be referred to as a financial forecast or financial projection.”

The course notes that these projections can be used “as a depiction of what the financial statements for the business will look like over a certain period of time, if the assumptions made when preparing them hold true.”

Since the term “pro forma” refers to projections or forecasts, it can apply to a variety of financial statements, including:

• Income statements
• Balance sheets
• Cash flow statements

Whether you’re trying to interpret pro forma financial statements or prepare them, these projections can be useful in guiding important business decisions. In fact, business owners, investors, creditors, and other key decision-makers all use pro forma financial statements to measure the potential impact of business decisions.

How Are Pro Forma Financial Statements Used?

Traditionally, financial statement analysis is used to better understand a company’s performance over a specified period. While this provides insight into a company’s historical health, creating pro forma financial statements focuses on its future. For this reason, these reports can be leveraged in several ways, including analyzing risk, projecting investments, and showing expected results before the end of a reporting period.

One of the most important uses of pro forma reports is related to decision-making and strategic planning efforts. For example, you might create pro forma financial statements to reflect the outcomes of three investment scenarios for your business. Doing so can allow you to conduct a side-by-side comparison of possible outcomes to determine which is favorable and guide your planning process.

Creating Pro Forma Financial Statements

Keep in mind that the general process of creating pro forma financial statements isn’t significantly different from that of creating traditional statements. The difference lies in the assumptions and adjustments made about various inputs, while the format and calculations remain the same.

There are, however, specific methods used for these forecasts. The percent of a sales forecasting method, for example, involves determining future expected sales and finding trends across accounts in statements. This is typically used when creating pro formas internally.

Other individual line items can also be easily forecasted, such as the cost of goods sold, since it can be assumed it will proportionally grow with sales. Line items like income tax expense, on the other hand, typically don’t change directly with sales. Stable businesses can generally estimate income tax expense as a percentage of income before taxes.

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.

Beyond the Numbers

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. Since these documents are based on assumptions, they shouldn’t be taken as fact. 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. Learners enrolled in the course learn the language of accounting and how to create financial statements and forecasts to make strategic decisions.

Do you want to learn more about what's behind the numbers on financial statements? Explore Financial Accounting , one of three courses comprising our Credential of Readiness (CORe) program , to discover how you can develop an intuitive knowledge of financial principles and statements to unlock critical insights into performance and potential.

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Pro Forma Template: What Are They? How To Use Them

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What is a pro forma template.

A pro forma template, also known as a pro forma financial statement, is a document used to project future financial performance based on hypothetical scenarios. In the context of accounting, pro forma templates will help you make decisions based on hypothetical scenarios as well.

They can also help you formulate a business plan , obtain investor funding, and more. By having a pro forma template ready, you can create your financial documents faster and more uniformly every time you need them.

Understanding A Pro Forma Statement

There are numerous types of pro forma documents. They may be required in certain situations, such as for public companies or during mergers and acquisitions. More or less, pro forma templates exist to give you a jumpstart on understanding your company’s financial health at a glance or when presenting to board members and stockholders.

You can use a template to create the following types of financial documents:

• Income statements
• Balance sheets
• Cash flow statements
• Owner’s equity statements
• Notes to financial statements
• Annual pro forma projections
• Investment projections
• Risk analysis

While pro forma templates are relatively straightforward to use, ensure that you seek legal advice from corporate lawyers to help you develop the right set of templates the first time you draft them. For some pro forma templates, ensure that they meet all applicable accounting rules, including GAAP principles and state laws.

Benjamin W.

Using A Pro Forma Template

The first step you should take with a pro forma template is to save a master copy of it in a safe, accessible location. There is always a chance for deletion across numerous duplications and file changes, which means that you should save it on a flash driver, external hard drive, or in the cloud. In case it gets deleted, you always have the original to back you up.

After saving your pro forma template, you will then take the following steps when using it:

• Use a form to help you automatically collect information entered into the template
• Enter financial data to help forecast income and cash flow
• Create different scenarios to map out how cash flow is affected as variables change
• Share it with an expert to make sure you are using it properly
• Make a copy of the original to avoid an accidental deletion
• Consider naming conventions for your files by statement type

The use of a pro forma template depends upon the type you are using. Some provide you with blank space to enter specific values, while others are just a set of guidelines. By inputting these variables, you can calculate your profit and loss under the template’s author’s guidelines.

As you can see, pro forma templates are simply financial documents that you can use for everyday business needs. It is imperative that you hire incorporation lawyers for specialized projects or one-time needs. Not addressing the critical details of business documents can negatively impact you.

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Pro Forma Template Samples

There are numerous resources available online regarding the development of pro forma templates that you case use to report on your business’s financial health. Spend some time looking for the right sample since several do not always address specific business needs.

Here are three templates that you can view online:

• Smartsheet pro forma template sample
• Freshbooks pro forma template sample
• Spreadsheet 123 pro forma template sample

When using these templates, you can generally input the data you need to populate complete financial statements. However, you will not own the software that stores the templates, which means you need to download updates every time. There are several ways and methods available to make your own pro forma template to consider.

You should also be able to easily edit your pro forma template since you will need to update your associates, employees, and investors on-the-fly occasionally. The most straightforward way to make your pro forma is by ensuring that you have your business objectives in mind first.

How Do You Make Your Own Pro Forma?

The best way to make your own pro forma statement template is by starting with the right type of document in the first place. You can find samples online or hire corporate lawyers to draft the templates you use to create financial statements.

However, here are the next steps forward that you can take to make your own pro forma templates:

• Review pro forma template samples to establish what should go into your financial documents
• Consider the elements that should be included in every statement
• Set a goal for sales over certain period of time
• Figure out how much the cost of production will be to support those sales
• Consider all other costs associated with running the business
• Add all of these financial data points to the model to predict net cash flow
• Set-up periodic reviews of your pro forma templates to ensure that they are still up-to-date

If you decide to find a pro forma template online, seek advice from a trusted colleague or attorney. Online templates tend to miss some critical notes when it comes to personalization and customization of your needs. However, some can be customized to your needs. The process of finding the right pro forma template can be frustrating, especially when there are question marks in your mind.

Simply put, it is more cost-effective to hire corporation lawyers the first time around you are drafting pro forma templates. Doing so will save you money, time, and stress over the long-run. You can even use planning with pro formas to start your business by hiring corporate lawyers to draft your documents instead of relying on templates created for hypothetical organizations or those serving other industries.

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Planning With Pro Formas To Start Your Business

In the previous section, we addressed the importance of legal advice. However, the cost of hiring an attorney or vetting one can turn many business owners away from engaging in this critical part of the process. Keep in mind that legal mistakes can come back to haunt you later, which means that it is essential to get your pro forma templates right from the first day you use them.

ContractsCounsel has made this process as easy as possible on business owners:

• Sign up for our service at no cost
• Post your project to our platform
• Begin receiving proposals from licensed and vetted attorneys

That is it. From one single location, you can receive numerous proposals and prices for your pro forma template project. Not only is the process convenient, but it also satisfies the need to draft your templates correctly and adequately for your jurisdiction while keeping your financial statements more uniform.

Working With A Lawyer For Business Formation

When starting a business, you will need to file Articles of Incorporation with your secretary of state’s office to receive a Certificate of Incorporation . However, there may be other entities that are better suited for your situation, and other legal requirements may apply, including the drafting of an operating agreement .

Working with a lawyer for a business formation is smart since you will effectively and efficiently avoid making legal mistakes, negatively impacting your company’s future. Corporate lawyers also have the experience and capacity to determine which documents you may need to stay compliant and prevent future disputes with clients, contractors, partners, and other third-parties you serve.

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Business Pro forma Template

Elevate your financial forecasting with our business pro forma templates, tailored for forward-thinking businesses seeking precise and adaptable financial planning tools. These templates are designed to offer a streamlined solution for projecting financials, ideal for startups, established enterprises, and every business in between, ensuring your financial planning is both professional and comprehensive. ‍

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Explore Examples of Graphic Design Quote Samples

From accounting to project management, these examples highlight how our templates improve your proforma process and facilitate transparent communication with your clients.

Insights from Effective Business Proforma Examples

Explore our curated selection of effective business proforma examples, each providing valuable insights into strategic financial planning. These examples demonstrate best practices in financial forecasting, from revenue projections to cost analysis, ensuring you have a robust framework for your business planning.

Crafting Strategic Plans with a Business Proforma Sample

Universal Accessibility : Ensure your business proforma plans are readily available on any device, thanks to versatile PDF format compatibility.

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Ease of Sharing : Share your business proforma plans effortlessly with stakeholders through email or other digital platforms, facilitating seamless communication.

Customizable Layouts : Tailor your templates to meet specific business needs, incorporating unique branding elements for a personalized touch.

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Transform your financial planning process with our custom business proforma templates. These templates are designed to:

Collecting Client Details: Start by gathering complete information about the client's needs and the scope of the project.

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Cater to various industries and business models, providing a universal tool for financial forecasting.

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Common Questions about Proforma Excel Template

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How to Write a Detailed Business Plan, Step-by-Step (Free Templates)

Posted november 14, 2022 by noah parsons.

Writing a business plan is one of the most valuable things you can do for your business. Study after study proves that business planning significantly improves your chances of success by up to 30 percent . That’s because the planning process helps you think about all aspects of your business and how your business will operate and grow.

In fact, writing a business plan is one of the only free things you can do to greatly impact the success and growth of your business. Ready to write your own detailed business plan? Here’s everything you need ( along with a free template ) to create your plan.

Before you write a detailed business plan, start with a one-page business plan

Despite the benefit of planning, it’s easy to procrastinate writing a business plan. Most people would prefer to work hands-on in their business rather than think about business strategy. That’s why, to make things easier, we recommend you start with a simpler and shorter one-page business plan .

With a one-page plan, there’s no need to go into a lot of details or dive deep into financial projections—you just write down the fundamentals of your business and how it works. A one-page plan should cover:

• Value proposition
• Market need
• Your solution

Competition

Target market.

• Sales and marketing
• Budget and sales goals
• Team summary
• Key partners
• Funding needs

A one-page business plan is a great jumping-off point in the planning process. It’ll give you an overview of your business and help you quickly refine your ideas.

If you’re ready to work on your one-page plan, check out our guide to writing a one-page business plan . It has detailed instructions, examples, and even a free downloadable template .

When do you need a more detailed business plan?

A one-page plan doesn’t always capture all the information that you need, however. If that’s the case, then it may be time to expand into a more detailed business plan.

There are several reasons for putting together a detailed business plan:

Flesh out the details 

A one-page business plan is just a summary of your business. If you want to document additional details such as market research, marketing and sales strategies, or product direction—you should expand your plan into a longer, more detailed plan. 

Build a more detailed financial forecast

A one-page plan only includes a summary of your financial projections. A detailed plan includes a full financial forecast, including a profit and loss statement , balance sheet , and cash flow forecast —one of the most important forecasts for any business.

Be prepared for lenders and investors

While investors might not ask to actually read your business plan, they will certainly ask detailed questions about your business. Planning is the only way to be well-prepared for these investor meetings.

Selling your business

If you’re selling your business, a detailed business plan presentation will be part of your sales kit. Potential buyers will want to know the details of how your business works, from marketing details to your product roadmap.

How to write a detailed business plan

When you do need to write a detailed business plan, focus on the parts most important to you and your business. If you plan on distributing your plan to outsiders, you should complete every section. But, if your plan is just for internal use, focus on the areas that will help you right now.

For example, if you’re struggling with marketing, spend time working on your target market section and marketing strategy and skip the sections covering the company organization.

Let’s go step-by-step through the sections you should include in your business plan:

1. Executive summary

Yes, the executive summary comes first in your plan, but you should write it last, once you know all the details of your business plan. It is truly just a summary of all the details in your plan, so be careful not to be too repetitive—just summarize and try to keep it to one or two pages at most. If you’ve already put together a one-page business plan, you can use that here instead of writing a new executive summary.

Your executive summary should be able to stand alone as a document because it’s often useful to share just the summary with potential investors. When they’re ready for more detail, they’ll ask for the full business plan.

For existing businesses, write the executive summary for your audience—whether it’s investors, business partners, or employees. Think about what your audience will want to know and just hit the highlights.

The key parts of your plan that you’ll want to highlight in your executive summary are:

• Your opportunity: This is a summary of what your business does, what problem it solves, and who your customers are. This is where you want readers to get excited about your business
• Your team: For investors, your business’s team is often even more important than what the business is. Briefly highlight why your team is uniquely qualified to build the business and make it successful.
• Financials: What are the highlights of your financial forecast ? Summarize your sales goals , when you plan to be profitable, and how much money you need to get your business off the ground.

2. Opportunity

The “opportunity” section of your business plan is all about the products and services that you are creating. The goal is to explain why your business is exciting and the problems that it solves for people. You’ll want to cover:

Mission statement

A mission statement is a short summary of your overall goals. It’s a short summary of how you hope to improve customers’ lives with your products and services. It’s a summary of the aspirations of your business and the guiding north star for you and your team. 

Problem & solution

Most successful businesses solve a problem for their customers. Their products and services make people’s lives easier or fill an unmet need in the marketplace. In this section, you’ll want to explain the problem that you solve, whom you solve it for, and what your solution is. This is where you go in-depth to describe what you do and how you improve the lives of your customers.

In the previous section, you summarized your target customer. Now you’ll want to describe them in much greater detail. You’ll want to cover things like your target market’s demographics (age, gender, location, etc.) and psychographics (hobbies and other behaviors). Ideally, you can also estimate the size of your target market so you know how many potential customers you might have.

Every business has competition , so don’t leave this section out. You’ll need to explain what other companies are doing to serve your customers or if your customers have other options for solving the problem you are solving. Explain how your approach is different and better than your competitors, whether it’s better features, better pricing, or a better location. Explain why a customer would come to you instead of going to another company. 

3. Execution

This section of your business plan dives into how you’re going to accomplish your goals. While the Opportunity section discussed what you’re doing, you now need to explain the specifics of how you’re going to do it.

Marketing & sales

What marketing tactics do you plan to use to get the word out about your business? You’ll want to explain how you get customers to your door and what the sales process looks like. For businesses that have a sales force, explain how the sales team gets leads and what the process is like for closing a sale.

Depending on the type of business that you are starting, the operations section needs to be customized to meet your needs. If you are building a mail-order business you’ll want to cover how you source your products and how fulfillment will work .

If you’re building a manufacturing business, explain the manufacturing process and the facilities you need to use. This is where you’ll talk about how your business “works,” meaning, you should explain what day-to-day functions and processes are needed to make your business successful.

Milestones & metrics

Until now, your business plan has mostly discussed what you’re doing and how you’re going to do it. The milestones and metrics section is all about timing. Your plan should highlight key dates and goals that you intend to hit. You don’t need extensive project planning in this section, just key milestones that you want to hit and when you plan to hit them. You should also discuss key metrics: the numbers you will track to determine your success.

Use the Company section of your business plan to explain the overall structure of your business and the team behind it.

Organizational structure

Describe your location, facilities, and anything else about your physical location that is relevant to your business. You’ll also want to explain the legal structure of your business—are you an S-corp, C-corp, or an LLC? What does company ownership look like?

Arguably one of the most important parts of your plan when seeking investment is the “Team” section. This should explain who you are and who else is helping you run the business. Focus on experience and qualifications for building the type of business that you want to build. 

It’s OK if you don’t have a complete team yet. Just highlight the key roles that you need to fill and the type of person you hope to hire for each role.

5. Financial plan and projections

Your business plan has now covered the “what”, the “how”, and the “when” for your business. Now it’s time to talk about money. What revenue do you plan on bringing in and when? What kind of expenses will you have?

Financial Forecasts

Your sales forecast should cover at least the first 12 months of your business and ideally contain educated guesses at the following two years in annual totals. Some investors and lenders might want to see a five-year forecast, but three years is usually enough.

You’ll want to cover sales, expenses, personnel costs, asset purchases, and more. You’ll end up with three key financial statements: An Income Statement (also called Profit and Loss), a Cash Flow Statement , and a Balance Sheet .

If you’re raising money for your business, the Financing section is where you describe how much you need. Whether you’re getting loans or investments, you should highlight what you need, and when you need it. Ideally, you’ll also want to summarize the specific ways that you’ll use the cash once you have it in hand.

6. Appendix 

The final section of your business plan is the appendix. Include detailed financial forecasts here as well as any other key documentation for your business. If you have product schematics, patent information, or any other details that aren’t appropriate for the main body of the plan but need to be included for reference.

Download a business plan template

Are you ready to write your business plan? Get started by downloading our free business plan template . With that, you will be well on your way to a better business strategy, with all of the necessary information expected in a more detailed plan.

If you want to elevate your ability to build a healthy, growing business, you may want to consider LivePlan.

It’s a product that makes planning easy and features step-by-step guidance that ensures you cover everything necessary while reducing the time spent on formatting and presenting. You’ll also gain access to financial forecasting tools that propel you through the process. Finally, it will transform your plan into a management tool that will help you easily compare your forecasts to your actual results.

Using your plan to grow your business

Your business plan isn’t just a document to attract investors or close a bank loan. It’s a tool that helps you better manage and grow your business. And you’ll get the most value from your business plan if you use it as part of a growth planning process . 

With growth planning, you’ll easily create and execute your plan, track performance, identify opportunities and issues, and consistently revise your strategy. It’s a flexible process that encourages you to build a plan that fits your needs.  So, whether you stick with a one-page plan or expand into a more detailed business plan—you’ll be ready to start growth planning. 

Ready to try it for yourself? Learn how LivePlan can help you use this modern business planning method to write your plan and consistently grow your business.

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A Triumph! Your Guide to Mastering Proforma Templates

July 24, 2023 - 7 min read

Proforma templates are invaluable tools for businesses of all sizes. These templates allow you to create professional and comprehensive documents that outline the financial aspects of a transaction or project . With their versatility and functionality, Proforma templates have become a staple in various industries, aiding in financial planning, budgeting, and forecasting.

Understanding Proforma Templates

A Proforma template is a pre-designed document that serves as a blueprint for creating financial projections, estimates, or invoices. It provides a structured format for presenting financial information in a clear and concise manner, and typically include sections for revenue projections, expense forecasts, cash flow statements, and other relevant financial information.

Unlike formal financial statements, Proforma templates are not legally binding documents. However, they play a crucial role in decision-making processes by providing stakeholders with valuable insights into the financial implications of a particular transaction or project.

Importance of Proforma Templates in Business

Proforma templates are essential tools for businesses for several reasons:

• Financial Planning: Forecast revenue, expenses, and cash flow, enabling you to make informed decisions about resource allocation and budgeting.
• Due Diligence: Demonstrate your thoroughness and professionalism to potential investors or collaborators.
• Accuracy and Efficiency: Verify that financial information is presented consistently and accurately, saving time and minimizing errors.
• Communication: Communicate clearly to your organization and with external stakeholders.
• Scenario Analysis: Explore different financial scenarios and assess the potential impact on your business.
• Budgeting: Create projects for future periods by inputting historical financial data and making assumptions about future trends

The Anatomy of a Good Proforma Template

A well-designed Proforma template encompasses key elements that make it comprehensive and useful. Let's take a closer look at these elements.

• Header: Clearly state the purpose of the Proforma, including the company name, date, and contact information.
• Summary: Provide a concise overview of the financial projections, highlighting key figures, such as sales revenue, expenses, and net income. 
• Assumptions: Outline the underlying assumptions and methodologies used to derive the financial projections, for transparency and credibility. 
• Revenue Forecast: Present a detailed breakdown of revenue sources, including sales forecasts, pricing information, and anticipated growth. 
• Expense Breakdown: Itemize and categorize all relevant expenses, such as production costs, overhead expenses, and marketing expenditures. 
• Profitability Analysis: Include metrics like gross margin, operating margin, and net profit margin to assess the profitability of the projected financials.
• Cash Flow Projection: Detail the expected inflows and outflows of cash over a specified period, enabling you to anticipate and plan for potential cash flow challenges. 

Common Mistakes to Avoid

While creating a Proforma template, it is important to be aware of common pitfalls and avoid them. Here are a few mistakes to watch out for:

• Overly Optimistic Projections: Be realistic when making revenue and growth assumptions to avoid setting unrealistic expectations. Overestimating sales or underestimating expenses can lead to inaccurate projections and misguided decision-making.
• Ignoring Variable Costs: Verify that all costs, including variable expenses, are accurately accounted for to provide a comprehensive financial picture. Neglecting variable costs, such as raw materials or direct labor, can skew the projections and result in misleading financial forecasts.
• Omitting Sensitivity Analysis : Incorporate sensitivity analysis to assess the impact of various scenarios on your financial projections, enhancing decision-making capabilities. By considering different market conditions or unexpected events, businesses can better understand the potential risks and opportunities associated with their projections.
• Misaligned Formatting: Maintain consistency in fonts, colors, and layout throughout the proforma template for a polished and professional appearance. Inconsistencies in formatting can make the template appear unprofessional and undermine its credibility.

Step-by-Step Guide to Mastering Proforma Templates

Now that we understand the importance and composition of Proforma templates, it's time to explore how to create and utilize them effectively.

• Select a Template: Choose a Proforma template that aligns with your industry and specific requirements. You can find a variety of templates online or create one from scratch using spreadsheet software.
• Customize the Header: Modify the header of the template to include your company name, logo, and contact information. This customization adds a professional touch so that the template represents your brand accurately.
• Organize the Sections: Structure the template by incorporating the essential elements discussed earlier. These elements typically include revenue forecasts, expense projections, cash flow analysis, and profitability assessments. Arrange them in a logical order that suits your needs, so that the template provides a comprehensive overview of your financial outlook.
• Input Relevant Data: Populate the template with accurate and up-to-date financial information, so that all calculations and formulas are correct. Be careful, as any errors or inaccuracies can compromise the reliability of your Proforma projections.
• Review and Verify: Double-check all figures, formulas, and assumptions to ensure the accuracy and integrity of the Proforma template. This review process is crucial for identifying any discrepancies or inconsistencies that may affect the validity of your financial projections. It is also advisable to seek feedback from colleagues or financial experts to gain additional perspectives and insights.

Adapting Proforma Templates to Different Business Needs

Proforma templates are flexible and customizable, making them adaptable to various business needs:

• Startups and New Ventures: Proforma templates can help startups project their financial performance, estimate funding requirements, and persuade investors. Include key financial metrics, such as projected revenue, expenses, and cash flow.
• Project Planning: Use Proforma templates to estimate costs, assess financial feasibility, and plan for contingencies when undertaking new projects. The goal is to be able to make informed decisions and allocate resources properly.
• Financial Reporting: Present financial information in a concise and standardized format for internal reporting or external purposes, such as loan applications or regulatory compliance. This makes it easier for stakeholders to understand and evaluate the company's financial performance.

Tips and Tricks for Optimizing Your Proforma Templates

To maximize the value of your Proforma templates, consider implementing the following tips and tricks:

Streamlining Your Proforma Process

• Establishing Standardized Procedures: Develop guidelines and templates that adhere to industry best practices, for consistency and efficiency.
• Training and Education: Train employees on how to create and interpret Proforma templates.
• Continuous Improvement: Regularly review and update Proforma templates to reflect changing market conditions, new products or services, and evolving business strategies.

Leveraging Technology for Proforma Templates

• Utilize Spreadsheet Software: Leverage the functionalities of spreadsheet software, such as Excel, to automate calculations, improve accuracy, and enhance visualization.
• Consider Cloud-Based Solutions: Explore cloud-based platforms that offer collaborative features, data integration, and accessibility from multiple devices.
• Integrate with Accounting Systems: Integrate your Proforma templates with accounting software to ensure accurate and up-to-date financial information.

Overall, mastering Proforma templates can be a game-changer for your business. By understanding their purpose, components, and best practices, you can effectively utilize Proforma templates to enhance financial planning, communicate your vision, and make informed decisions. Embrace the power of Proforma templates, and embark on a triumphant journey towards financial success!

Master Proforma templates with Wrike's expert guide. Start a free trial today and accurately forecast your financials for strategic business planning.

Note: This article was created with the assistance of an AI engine. It has been reviewed and revised by our team of experts to ensure accuracy and quality.

Occasionally we write blog posts where multiple people contribute. Since our idea of having a gladiator arena where contributors would fight to the death to win total authorship wasn’t approved by HR, this was the compromise.

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Time blocking can help you manage your time more effectively and increase productivity. By allocating specific time periods for different tasks and activities, you can focus your energy and attention on one thing at a time, leading to greater efficiency and better results. Let's explore the concept of time blocking, the benefits it offers, the basics of creating a time blocking template, and provide you with a step-by-step guide to creating your own personalized time blocking template. Additionally, we will share some tips for maximizing the effectiveness of your time blocking system. So let's dive in and learn how to make the most of your time! Understanding the Concept of Time Blocking Time blocking is a method of scheduling your day by dividing it into focused blocks of time dedicated to specific tasks or activities. Rather than attempting to multitask or juggle multiple priorities simultaneously, you allocate uninterrupted time for each task, allowing you to give your full attention and energy to it. Imagine starting your day with a clear plan of action, knowing exactly what you need to accomplish and when. With time blocking, you can create a roadmap for your day, outlining the tasks and activities that need your attention. With time slots, you can eliminate the guesswork and uncertainty that often comes with managing your time.Imagine starting your day with a clear plan of action, knowing exactly what you need to accomplish and when. With time blocking, you can create a roadmap for your day, outlining the tasks and activities that need your attention. By assigning specific time slots, you can eliminate the guesswork and uncertainty that often comes with managing your time. 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Spending Wisely: Overcoming Difficulties in Using Business Expense Templates

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It has been reviewed and revised by our team of experts to ensure accuracy and quality.

The Ultimate Guide to Designing and Utilizing Excel KPI Templates

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Businesses deal with vast volumes of data, and Excel's robust capabilities allow users to efficiently manage and analyze large datasets. Step-by-Step Guide to Designing Your Own Excel KPI Template Now that we understand the significance of Key Performance Indicators (KPIs) and the benefits of Excel KPI templates, let's dive deeper into the step-by-step process of creating your own template for effective performance tracking. Identifying Your Key Performance Indicators Identify the KPIs that matter most to your business. These indicators should align with your company's objectives and reflect the critical areas that impact your overall performance. Take your time to carefully analyze your business goals and determine the key metrics that will help you measure success. If you run an e-commerce business, some relevant KPIs might include conversion rate, average order value, customer acquisition cost, and customer lifetime value. These metrics can provide valuable insights into the effectiveness of your marketing campaigns, sales performance, and overall profitability. Setting Up Your Excel Spreadsheet Once you have identified your KPIs, it's time to set up your Excel spreadsheet. This step is crucial for organizing your data and creating a framework that allows for easy analysis and interpretation. Start by opening a new Excel workbook and creating a separate sheet for your KPI template. This will help keep your data organized and prevent any confusion or clutter. Name the sheet according to the purpose of your template, such as "Sales KPIs" or "Marketing KPIs." Next, organize your data into relevant columns and rows. Each column should represent a specific KPI, while each row should contain the corresponding data for that KPI. For example, if you have chosen conversion rate, average order value, and customer acquisition cost as your KPIs, you would create three columns with appropriate headers. Consider adding additional columns for dates or time periods to track the progress of your KPIs over time. Also, format your spreadsheet in a way that is visually appealing and easy to navigate. Use bold headings, color coding, and borders to differentiate between different sections and make the information more digestible. Incorporating KPIs into Your Template Next, it's time to incorporate your identified KPIs into your Excel template. This step involves adding formulas and conditional formatting to automatically calculate and display the KPI values based on the input data. For each KPI, select the cell where you want the calculated value to appear. Then, use the appropriate formula to calculate the KPI based on the data in the corresponding column. For example, if you want to calculate the conversion rate, you would divide the number of conversions by the total number of visitors and multiply it by 100. Conditional formatting can also be applied to highlight specific values or trends. For instance, you can set up conditional formatting to color cells green if the KPI value exceeds a certain target, or red if it falls below a specific threshold.  Customizing your template to suit your business requirements is key. You can add additional features such as charts, graphs, or pivot tables to provide a visual representation of your KPIs and make it easier to interpret the data. Remember to regularly update your template with new data to keep track of your progress and ensure the accuracy of your KPI calculations. This will allow you to monitor your performance over time and make informed decisions to drive continuous improvement. Utilizing Excel KPI Templates Effectively A well-designed Excel KPI template is only effective if you know how to use it efficiently. For instance, the accuracy and relevance of the data you input into your KPI template are critical. Remember to regularly update your template with the latest data to accurately track your performance. Consistent and accurate data input is vital for obtaining reliable insights. Also, recall that an Excel KPI template provides a wealth of data, but its true value lies in the insights it can reveal. Take the time to analyze the data and identify patterns, trends, and outliers. This will help you gain a deeper understanding of your company's performance and make informed decisions. As your business evolves, it is crucial to regularly update and maintain your Excel KPI template. This includes revisiting your KPIs, modifying formulae and formatting as required, and ensuring the template remains relevant to your changing business needs. Advanced Excel KPI Template Techniques Excel offers advanced features and functions that can take your KPI tracking to the next level.  For instance, Excel functions like IF, SUMIF, and VLOOKUP can significantly enhance your KPI tracking. These functions allow you to manipulate and analyze data more efficiently, automate calculations, and generate dynamic reports based on specific conditions. In addition, visual representations of data can often convey information more effectively than tables or numbers alone. Excel provides a range of charting options, from bar graphs to line charts, that can help you visualize KPI trends, comparisons, and progress over time. Overall, designing and utilizing Excel KPI templates is an essential step in measuring and improving performance in today's competitive business landscape. By understanding the fundamentals of KPIs, harnessing the power of Excel, and adopting effective techniques, businesses can gain valuable insights that drive growth and success. So, start leveraging Excel KPI templates today and take your company's performance to new heights. Design and utilize Excel KPI templates effectively with Wrike's intelligent work management platform. Start your free trial today and harness the power of data for successful decision making. Note: This article was created with the assistance of an AI engine. It has been reviewed and revised by our team of experts to ensure accuracy and quality.

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Business Plan Templates

Business plan templates and pro forma financial projections.

Quality Business Plan has numerous industry-specific business plan templates and financial projection templates ready for small business owners to customize in minutes!  Before starting a business, entrepreneurs should have, at the very least, a basic business plan with easy-to-understand proforma financial projections.  The important sections of a business plan would include the executive summary, company description, industry research, marketing section, funding section, and always, pro forma financial projections. 

Unfortunately, most business owners have no idea how to structure, let alone write, a well-prepared business plan.  From this, a business plan template and industry-specific financial model are critical.  Below are a few business plan templates we offer for downloading.

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Turbocharge Your Success: Unleashing the Power of Business Plan Templates with Pro Forma Financial Projections!

Benefit 1: time savings abound with a business plan template..

Our business plan templates with pro forma financial projections are a time-saving tool that entrepreneurs swear by. Instead of starting from a blank page, the template provides a structured framework, eliminating the need to reinvent the wheel. By simply filling in the relevant information in our editable Word doc and Excel financial model, you can save countless hours of brainstorming and organizing your thoughts. The template streamlines the planning process, guiding you through each section and ensuring you cover all the components of a comprehensive business plan. Whether it's the executive summary, industry analysis, or financial projections, the template acts as a roadmap, helping you stay focused and efficient. With time, you can devote more energy to refining your strategies and taking your business to new heights.

The time-saving benefit of having business plans cannot be overstated. Investing time upfront in creating comprehensive plans saves valuable time in the long run. Well-crafted plans provide roadmaps, eliminating the need to make hasty decisions or constantly react to unforeseen circumstances. They help prioritize tasks, allocate resources efficiently, and focus on business objectives. With plans in place, informed decisions can be made more quickly, as various scenarios and potential challenges have already been considered. Ultimately, the time saved allows for more energy dedicated to executing strategies, growing businesses, and achieving success.

Benefit 2: Organization Clarity

A business plan template with industry-specific pro forma financial projections brings organizational clarity to the forefront of your business planning process. By leveraging your business's structure, goals, and strategies, you can better understand its structure. The template prompts you to articulate your thoughts and ideas, enabling you to craft a coherent and logical plan. As you work through each section, you'll uncover valuable insights and connections, ensuring a cohesive narrative for your business's future. The template's framework acts as a guide, providing a clear pathway to outline your business's vision, mission, and objectives. With organizational clarity, you can confidently navigate the complexities of your business and communicate your plans effectively to stakeholders.

Benefit 3: Comprehensive Analysis Structure

A good business plan template catalyzes comprehensive analysis. It encourages you to delve deep into critical aspects of your business, such as industry research, competitive analysis, and pro forma financial projections. By following the template's prompts, you embark on a journey of exploration and discovery, gaining valuable insights into your target market, industry trends, and customer preferences. The business plan template's structure ensures you cover all the necessary elements, allowing you to identify potential opportunities, challenges, and risks. Through this thorough analysis, you equip yourself with the knowledge to make informed decisions and develop strategies aligning with your business goals. Ultimately, the comprehensive analysis facilitated by the template strengthens the foundation of your business plan and enhances your chances of success.

One of the benefits of comprehensive analysis structures in business plans is that they provide businesses with the tools to conduct in-depth analyses across multiple areas. By incorporating comprehensive analysis structures into their business plans, businesses can thoroughly examine various aspects of their operations, industries, markets, and competitors. These structures enable businesses to delve into multiple business plan components, such as market analyses, financial forecasts, competitive research, and risk assessments, across all their business plans. By conducting comprehensive analyses, businesses gain valuable insights that inform their decision-making, enhance their strategic planning, and increase their chances of success in their respective markets.

Benefit 4: Business Plan Templates Offer a Professional Presentation Format.

A professional presentation can make all the difference in impressing potential investors, partners, or lenders. Business plan templates with pro forma financial projections offer a valuable advantage by providing pre-designed layouts and formatting options. These elements give your plan a polished and professional appearance, elevating its visual appeal and overall impact. With a template, you can ensure consistency in fonts, colors, and styles, presenting a cohesive and visually appealing document. This professional presentation enhances your plan's credibility and captures vital stakeholders' attention. By leveraging the template's design features, you create a compelling first impression and increase your chances of securing support and investment for your business.

Benefit 5: Standardized Content

Business plan templates with pro forma financial projections provide standardized content that covers essential elements necessary for a comprehensive business plan. A business plan template typically includes an executive summary, company description, marketing strategy, and financial forecasts. By following the template's structure, you can ensure that you address all the crucial components required for a well-rounded plan. The standardized content is a checklist, ensuring you don't overlook vital information. It helps you present a complete and coherent picture of your business, making it easier for readers to understand and evaluate your ideas. Utilizing a template saves you time and effort by providing a reliable framework for creating a thorough and professional business plan.

Benefit 6: Collaboration Facilitation

A business plan template with pro forma financial projections is an effective collaboration facilitator, mainly when working with a team or seeking stakeholder input. Using a business plan template provides a common starting point that unifies everyone's efforts. Team members can easily contribute ideas and insights within the template framework, ensuring a cohesive and coordinated approach. The template is a shared reference point, promoting alignment and streamlining collaboration. It enables individuals to focus on specific sections while maintaining a holistic view of the overall plan. With a business plan template, collaboration becomes more efficient, enabling effective teamwork and harnessing the collective expertise of all involved parties.

Benefit 7: Learning Tool.

A business plan template serves as an invaluable learning tool, particularly for those new to entrepreneurship or unfamiliar with the structure of a business plan. Using a business plan template with pro forma financial projections, you embark on a guided educational journey that helps you grasp the critical components of a successful plan. As you fill in the template, you gain practical knowledge about sections such as market analysis, competitive research, financial projections, and more. The template provides step-by-step guidance, teaching you how to develop a comprehensive and well-structured plan. Through this process, you acquire knowledge about business planning and build the skills necessary for future endeavors. The template becomes a trusted mentor, fostering your understanding and confidence in navigating the world of entrepreneurship.

Benefit 8: Adaptability

Business plan templates with pro forma financial projections offer a balance between structure and adaptability, allowing you to customize them to meet the unique needs of your business. While templates provide a solid framework, they often have the flexibility to be tailored to your specific industry, target market, and business model. You can modify the business plan template sections, add or remove elements, and adjust the content to align with your vision and goals. This adaptability ensures that your business plan is relevant and meaningful, accurately representing your business and its unique value proposition. By customizing the template, you create a personalized plan that showcases your business's distinct strengths and advantages, setting you up for success in your chosen market.

One of the benefits of having business plans is their adaptability. Business plans, being flexible documents, can be customized to meet the specific needs of different businesses. Whether you're operating in various industries, targeting diverse markets, or adopting unique business models, the adaptability of business plans allows you to tailor them accordingly. By modifying the templates and content to align with your specific circumstances, you ensure that your business plans accurately reflect your goals and strategies. This adaptability enables businesses to stay relevant and responsive to changing market dynamics, seize new opportunities, and adjust their approaches as needed. With adaptable business plans, you can navigate the ever-evolving business landscape with confidence and agility.

Benefit 9: Benchmarking Tool

A business plan template is a valuable benchmarking tool, allowing you to monitor and assess your progress over time using the business plan format. Setting key performance indicators (KPIs) and milestones within the template and its pro forma financial statements establishes measurable goals that serve as benchmarks for success. As you regularly revisit and update your plan, you can track your achievements against these benchmarks, gaining insights into areas of strength and identifying potential areas for improvement. The template acts as a guide, helping you evaluate the effectiveness of your strategies and make necessary adjustments to stay on track toward your business objectives. This iterative process allows you to refine your approach, maximize performance, and strive for continuous growth and success.

Benefit 10: Confidence Booster

Developing a business plan, especially the pro forma financial projections, can be intimidating. Still, a template is a confidence booster throughout the process, just as long as you follow the business plan format. It provides a clear roadmap, guiding you through each step and ensuring you cover all the necessary aspects of your business. With a template as your guide, you gain reassurance that you're addressing critical elements such as market analysis, competitive positioning, financial projections, and more. This boosts your confidence in the planning process, reinforcing your belief in your business idea and its potential for success. The template's structure and prompts alleviate uncertainties, empowering you to articulate your vision and strategies with conviction. With a well-crafted plan, you confidently approach investors, partners, and stakeholders, increasing the likelihood of achieving your business goals.

Pro Forma Balance Sheet Template - Excel and Google Sheets

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Simplify day-to-day data collection with easy and quick inputs. Perfect for startups or small businesses, this user-friendly template is compatible with Excel and Google Sheets. Download it today and manage your pro forma balance sheet effortlessly!

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Introducing our versatile Pro Forma Balance Sheet Template, compatible with both Excel and Google Sheets. This easy-to-use tool collects your data through simple questions and automatically generates your balance sheet. It even provides feedback on whether it balances or not. To ensure a seamless experience, we've prepared a step-by-step video guide, eliminating any confusion in creating your balance sheet.

Download the Pro Forma Balance Sheet Template for Free!

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Learn how to create a pro forma balance sheet in minutes

Compatible with both Excel and Google Sheets this template allows you to generate a ready-to-use balance sheet effortlessly. Just input your data as answers to the questions on the input tab.

It's perfect for small businesses seeking a loan or conducting financial reviews.

How to Create your own Pro Forma Balance Sheet Without a Template

Step 1: Format Your Pro Forma Balance Sheet - The initial task involves formatting your balance sheet. Remember, in its simplest form, the equation is Assets = Liabilities + Owner's Equity. The image below shows the fundamental line items comprising a balance sheet.

Step 2: Enter Starting Balances - Start by entering the initial balances. For instance, consider a fictitious business named Adam's Lawn Care. At the beginning, the balance sheet might appear relatively empty, as shown below. It may consist of cash in the bank, a lawnmower, and "Paid in Capital," representing the owner's initial investment into the company to purchase the lawnmower.

Note that the $4,500 in cash also appears in the Paid in Capital section as the owner's investment into the company.

Step 3: How Sales Impact the Balance Sheet - As the business generates sales, it impacts the balance sheet. For instance, assume Adam's Lawn Care secures contracts with five local businesses to mow their grounds, invoicing them for payment in 30 days. If each company is charged $1,000 for the first month of work, the sales amount to $5,000. However, the day after invoicing, this amount won't appear as cash on the balance sheet but rather as Accounts Receivable.

Step 4: Impact of Expenses on the Balance Sheet - As I generate sales, there will be associated expenses like fuel, oil, meals, etc. Let's assume these expenses amount to $1,000, with half paid in cash and the other half using a credit card. Let's examine how this affects my balance sheet.

Additionally, you'll notice that Retained Earnings increased to $4,000. Retained earnings represent the cumulative net profit or net loss. At present, my income is $5,000, and expenses amount to only $1,000, resulting in a net income of $4,000, which is reflected in the retained earnings on the balance sheet.

Step 5: How a New Loan Impacts the Balance Sheet - To illustrate, let's consider Adam's Lawn Care purchasing a small office for the business. To finance the purchase, a loan of $75,000 is obtained from the bank. Consequently, liabilities increase by the loan amount, and assets increase by the building's price, both amounting to $75,000.

In summary, understanding how different transactions impact the balance sheet is crucial when creating your own financial model. Always ensure that each transaction impacting an asset is balanced by a corresponding impact on a liability or equity account, maintaining balance in your balance sheet.

Pro Forma Balance Sheet FAQs

What is a pro forma balance sheet  .

A pro forma balance sheet is a financial statement that presents a company's assets, liabilities, and equity at a specific point in time.

Does this pro forma balance sheet template work with Google Sheets?

Yes, you can easily convert this Excel template into a Google Sheets-based balance sheet template.

How to read a pro forma balance sheet?

A pro forma balance sheet displays a company's assets at the top, followed by its liabilities, and finally, the equity section at the bottom. The total assets should equal the total liabilities plus equity.

How to calculate retained earnings on a pro forma balance sheet?

Retained earnings represent the cumulative net income over the company's lifetime. For example, if the company has been in business for 10 years with a net income of $100,000 per year, the retained earnings would be $1,000,000 (10 x $100,000).

What is goodwill on a pro forma balance sheet?  

Goodwill on the balance sheet is the result of acquiring another company for more than its net asset value. For instance, if a company is acquired for $1 million, but its net asset value is $700,000, the difference of $300,000 represents goodwill. Watch our video on how to calculate goodwill for an acquisition .

What is an opening balance sheet?

An opening balance sheet is the balance sheet at the start of a specific period. For instance, if you are required to present an opening balance sheet for the beginning of the year, simply provide the historical balance sheet as of the first day of that year. However, if you are asked for an opening balance sheet for a future date, you will need to create a projected balance sheet to reflect the anticipated financial position.

What is a projected balance sheet?  

A projected balance sheet is a balance sheet created for a specific future date. If you are requested to provide a projected balance sheet for a business that you haven't started yet, our startup balance sheet template can help you generate one for day 1 of your startup. On the other hand, if you need to provide a projected balance sheet for an existing business, you will need to develop a comprehensive set of financial projections. A projected balance sheet works together with a projected income statement and cash flow projection, so you will likely need one of our 70+ projected financial models which will include up to 5 years of a projected balance sheet. Read our balance sheet forecasting guide for more details.

What is a pro forma balance sheet?

A pro forma balance sheet is essentially the same as a projected balance sheet. It involves presenting a balance sheet that reflects the financial condition of a business on a particular future date.

What is a balance sheet forecast?

A balance sheet forecast is another term used for a projected balance sheet. It entails presenting a balance sheet that represents the financial status of a business on a specific future date. To create a forecasted balance sheet, you will also need to develop projections for your income statement and cash flow statement.

What is a common size balance sheet? 

A common size balance sheet displays the relative percentage of each asset, liability, and equity line item compared to the total assets, liabilities, and equity.

How to calculate a common size balance sheet? 

To compute a common size balance sheet, follow these steps:

• Fill out a balance sheet template with all the asset, liability, and equity line items.
• Divide each asset line item by the total assets to determine the relative percentage that each asset represents of the total assets.
• Similarly, divide each liability and equity line item by the total liabilities and equity, respectively, to obtain the relative percentage for each line item.

By performing these calculations, you can create a common size balance sheet that provides a clearer picture of the proportionate significance of each component in relation to the total values of assets, liabilities, and equity.

Common size balance sheet example

You can see an example of a common size balance sheet below. Notice the column with the relative percentages for each line item.

How to analyze a common size balance sheet?

The significance of a common size balance sheet lies in its comparability to other companies, regardless of their size. For instance, when examining Apple's balance sheet, despite its significantly larger figures, converting it into percentages enables a meaningful comparison to assess the similarity of relative current liabilities with your own. This approach allows for meaningful financial benchmarking and insights into how your company stacks up against industry leaders, regardless of their scale.

How should I fill out a pro forma balance sheet if I am self-employed?

Fortunately, there is no substantial difference between a self-employed balance sheet and a balance sheet for a larger business. You will still need to input your assets, liabilities, and equity investments into our balance sheet template. However, a challenge for a self-employed balance sheet is that you must only include assets and liabilities directly related to the business. This highlights the importance of maintaining a separate bank account for your business, allowing you to identify the cash that belongs to the business and should be added to the self-employed balance sheet. Additionally, using a separate credit card for business expenses, rather than a personal one, enables clear tracking of business-related debt, which can be accurately reflected on your balance sheet.

What goes on a pro forma balance sheet?  

Here is a list of common categories on the balance sheet:

Current Assets

• Cash in Bank
• Accounts receivable
• Prepaid Expenses
• Other Current Assets

Fixed Assets

• Machinery & equipment
• Furniture & fixtures
• Leasehold improvements
• Land & buildings
• Other fixed assets
• Accumulated depreciation

Other Assets

• Intangibles

Liabilities and Equity

Current Liabilities

• Accounts payable
• Taxes payable
• Notes, short-term (due within 12 months) 
• Current part, long-term debt
• Other current liabilities

Long-term debt

• Bank loans payable
• Notes payable to stockholders
• LESS: short-term portion
• Other long term debt

Owner’s Equity

• Invested Capital
• Retained earnings - beginning
• Retained earnings - current
• Total Owners’ Equity

What are assets on a pro forma balance sheet? 

‍ The most common asset categories to be listed on a balance sheet are:

What are liabilities on a pro forma balance sheet? 

‍ The most common liabilities on a balance sheet are:

How to fill out a pro forma balance sheet? 

To complete a balance sheet, you need to input all your current assets, liabilities, and owner's equity into a balance sheet template.

What does a pro forma balance sheet look like?

‍ Below you will find an example of a pro forma balance sheet:

Check out our Highly Rated Financial Projection Templates

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Access our collection of user-friendly templates for business planning, finance, sales, marketing, and management, designed to assist you in developing strategies for either launching a new business venture or expanding an existing one.

You can use the templates below as a starting point to create your startup business plan or map out how you will expand your existing business. Then meet with a  SCORE mentor to get expert business planning advice and feedback on your business plan.

If writing a full business plan seems overwhelming, start with a one-page Business Model Canvas. Developed by Founder and CEO of Strategyzer, Alexander Osterwalder, it can be used to easily document your business concept.

Download this template to fill out the nine squares focusing on the different building blocks of any business:

• Value Proposition
• Customer Segments
• Customer Relationships
• Key Activities
• Key Resources
• Key Partners
• Cost Structure
• Revenue Streams

For help completing the Business Model Canvas Template, contact a SCORE business mentor for guidance

From creating a startup budget to managing cash flow for a growing business, keeping tabs on your business’s finances is essential to success. The templates below will help you monitor and manage your business’s financial situation, create financial projections and seek financing to start or grow your business.

This interactive calculator allows you to provide inputs and see a full estimated repayment schedule to plan your capital needs and cash flow.

A 12-month profit and loss projection, also known as an income statement or statement of earnings, provides a detailed overview of your financial performance over a one-year period. This projection helps you anticipate future financial outcomes by estimating monthly income and expenses, which facilitates informed decision-making and strategic planning. 

If you’re trying to get a loan from a bank, they may ask you for a personal financial statement. You can use this free, downloadable template to document your assets, liabilities and net worth. 

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Marketing helps your business build brand awareness, attract customers and create customer loyalty. Use these templates to forecast sales, develop your marketing strategy and map out your marketing budget and plan.

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Whether you are starting your business or established and looking to grow, our Business Healthcheck Tool will provide practical information and guidance.

Learn how having a SCORE mentor can be a valuable asset for your business. A SCORE mentor can provide guidance and support in various areas of business, including finance, marketing, and strategy. They can help you navigate challenges and make important decisions based on their expertise and experience. By seeking out a SCORE mentor, you can gain the guidance and support you need to help grow your business and achieve success.

SCORE offers free business mentoring to anyone that wants to start, currently owns, or is planning to close or sell a small business. To initiate the process, input your zip code in the designated area below. Then, complete the mentoring request form on the following page, including as much information as possible about your business. This information is used to match you with a mentor in your area. After submitting the request, you will receive an email from your mentor to arrange your first mentoring session.

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What Is Pro Forma?

• Types of Financial Statements
• Pro Forma FAQs
• Corporate Finance

Pro Forma: What It Means and How to Create Pro Forma Financial Statements

Pro forma means “for the sake of form” or “as a matter of form." When it appears in financial statements, it indicates that a method of calculating financial results using certain projections or presumptions has been used.

Pro forma financials are not computed using generally accepted accounting principles  (GAAP) and usually leave out one-time expenses that are not part of normal company operations, such as restructuring costs following a  merger .

Essentially, a pro forma financial statement can exclude anything a company believes obscures the accuracy of its financial outlook and can be a useful piece of information to help assess a company's future prospects .

Key Takeaways

• Pro forma, Latin for “as a matter of form” or “for the sake of form”, is a method of calculating financial results using certain projections or presumptions.
• Pro forma financials may not be GAAP compliant but can be issued to the public to highlight certain items for potential investors.
• They can also be used internally by management for aiding in business decisions.
• It's illegal for publicly traded companies to mislead investors with pro forma financial results that do not use the most conservative possible estimates of revenue and expense.

Investopedia / Matthew Collins

What Are the Types of Pro Forma Financial Statements?

Pro forma financial statements are projections of future expenses and revenues, based on a company's past experience and future plans.

Some standard pro format statements include the following:

Pro Forma Budget Documents

A budget anticipates the inflow of projected revenues and the outflow of funds for a defined future period, usually a  fiscal year .

A budget is based on certain assumptions about future expenses and revenues. It takes into account past expenses and revenues and factors in the costs of the company's plans for the fiscal year.

Pro Forma Company Income Statements

A pro forma income statement uses the pro forma calculation method, mainly to draw the attention of potential investors to specific numbers when a company issues its quarterly earnings announcement .

For example, a company will report its actual sales and expenses for the quarter that just passed and, in the same chart, will list its projections of these numbers for the current quarter.

In this case, the company is projecting the future, based on its knowledge of past sales and expenses and factoring in expected changes.

Pro Forma Earnings Projections

A company may present a pro forma statement to inform investors about their internal assessment of the financial outcome of a proposed change in the business.

For example, if a company is considering an acquisition or a merger, it may publish a pro format statement of the expected impact of the move on its future earnings and expenses.

Pro Forma Financial Accounting

In  financial accounting , a pro forma earnings report excludes unusual or nonrecurring transactions.

These excluded expenses could include declining investment values, restructuring costs, and adjustments made on the company’s balance sheet that fix accounting errors from prior years.

Pro Forma Managerial Accounting

Accountants prepare financial statements in the pro forma method ahead of a proposed transaction such as an acquisition, merger, a change in a company's capital structure , or new capital investment.

These are models that forecast the expected result of the proposed transaction. They focus on estimated net revenues, cash flows, and taxes.

The statements are presented to the company's management to help it make a decision on a proposed action based on its potential benefits and costs.

Limitations of Pro Forma Statements

Investors should be aware that a company’s pro forma financial statements can hold figures or calculations that do not comply with generally accepted accounting principles (GAAP), the set of standards followed by public companies for their financial statements.

In fact, they can differ vastly. Pro forma results may contain adjustments to GAAP numbers in order to highlight important aspects of the company's operating performance.

Pro forma financials in the United States boomed in the late 1990s when dot-com companies used the method to make losses appear like profits or, at a minimum, to reveal much greater gains than indicated through U.S. GAAP accounting methods.

The U.S. Securities and Exchange Commission  (SEC) responded by  cautioning that publicly traded companies  report and make public U.S. GAAP-based financial results as well. The SEC also clarified that it would deem using pro forma results to grossly misconstrue GAAP-based results and mislead investors fraudulent and punishable by law.

Using pro forma results to grossly misconstrue GAAP-based results and mislead investors is deemed by the U.S. Securities and Exchange Commission (SEC) to be fraudulent and punishable by law.

How to Create a Pro Forma Statement

Basic templates for creating pro forma statements can be found online, or they can be created using a Microsoft Excel spreadsheet to automatically populate and calculate the correct entries based on your inputs.

You can also create a pro format financial statement by hand. The steps are:

• Calculate the estimated revenue projections for your business. This process is called pro forma forecasting. Use realistic market assumptions. Do your research and speak with experts and accountants to determine what a normal annual revenue stream is, as well as asset accumulation assumptions. Your estimates should be on the conservative side.
• Estimate your total liabilities and costs. Liabilities include loans and  lines of credit . Costs include lease payments, utilities, employee pay, insurance, licenses, permits, materials, and taxes. Keep your estimates realistic.
• Use the revenue projections from Step 1 and the total costs found in Step 2 to create the first part of your pro format, This part will project your future  net income  (NI).
• Estimate cash flows . This part of the pro forma statement will identify the net effect on cash if the proposed business change is implemented. Cash flow differs from NI because, under  accrual accounting , certain revenues and expenses are recognized prior to or after cash changes hands.

Here’s a historical example of a pro forma income statement, courtesy of Tesla Inc.'s (TSLA) unaudited pro forma condensed and consolidated income statement for the year ended Dec. 31, 2016.

What Is a Pro Forma Financial Statement?

Pro forma financial statements incorporate hypothetical numbers or estimates. They are built into the data to give a picture of a company's profits if certain nonrecurring items are excluded.

These are often intended to be preliminary or illustrative financials that do not follow standard accounting practices. Companies use their own discretion in calculating pro forma earnings, including or excluding items depending on what they feel reflects the company's true performance or future performance.

As pro forma forecasts are hypothetical in nature, they can deviate from actual results, sometimes significantly.

What's the Difference Between Pro Forma and GAAP Financials?

There are no universal rules that companies must follow when reporting pro forma earnings. This is why it is important for investors to distinguish between pro forma earnings and those reported using generally accepted accounting principles (GAAP).

GAAP enforces strict guidelines when companies report earnings, while pro forma figures are better thought of as hypothetical earnings.

For this reason, investors must examine not only the pro forma earnings, but also GAAP earnings, and never mistake one for the other.

What Is a Pro Forma Invoice?

A pro forma invoice is a preliminary  bill of sale  sent to a buyer in advance of a shipment or delivery of goods. The invoice will typically describe the purchased items and other important information, such as the shipping weight and transport charges.

A pro forma invoice requires only enough information to allow customs officials to determine the duties needed from a general examination of the included goods.

Can You Compare Pro Forma Statements From Different Companies?

Maybe, but it is not advised. Companies' definitions of pro forma vary along with their internal methods for forecasting and making assumptions.

If you don't know how each of the companies defines its pro forma figures, you may be comparing apples to oranges. 

U.S. Securities and Exchange Commission. " ACTION: Cautionary Advice Regarding the Use of "Pro Forma" Financial Information in Earnings Releases ."

U.S. Securities and Exchange Commission. " Tesla, Inc. Form 10-K ."

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