Funding Workbook - INCOME STATEMENTS


Being able to present a clear, concise, logical and supportable financial projection is probably the most important key to having a chance of obtaining the capital you desire. If you don't have financial forecast ability, hire someone who does. Have your pro forma give a month by month breakdown for the first year and then quarterly or annually for the next four years.

Projections Should Include and Fully Support:

    Sales Estimates
    Administrative Costs
    Production Costs
    Sales Costs
    Capital Expenditures
    Gross Margin by Product Line
    Sales Increase by Product Line
    Interest Rates on Debts
    Income Tax Rate
    Accounts Receivable Collection Plan
    Accounts Payable Schedule
    Inventory Turnover
    Depreciation Schedules
    Usefulness of Assets

The Income Statement (Profit & Loss)
The income projection enables the owner/manager to develop a preview of the amount of income generated each month and for the business year, based on reasonable predictions of monthly levels of sales, costs and expenses.

1. Total Net Sales (Revenues)
The total number of units of products or services you realistically expect to sell each month in each department at the prices you expect to get. Use this step to create the projections to review your pricing practices. What returns, allowances and markdowns can be expected?

2. Costs of Sales
The key to accurately calculating your cost of sales is not to overlook any costs that you have incurred. Calculate the cost of sale of all products and services used to determine total net sales. Where inventory is involved, remember transportation costs and any direct labor.

3. Gross Profit
Subtract the total cost of sales from the total net sales to obtain gross profit.

4. Gross Profit Margin
The gross profit is expressed as a percentage of total sales (revenues). It is calculated by dividing the gross profits by the total net sales.

5. Controllable Expenses

    Salary expenses -- Base pay plus overtime.
    Payroll expenses -- Include paid vacations, sick leave, health insurance, unemployment
        insurance and social security taxes (employer paid portion).
    Outside services -- Include costs of subcontracts, overflow work and special or one-time
    Supplies -- Services and items purchased for use in the business.
    Repair and maintenance -- Regular maintenance and repair, including periodic large
        expenditures such as painting.
    Advertising -- Include desired sales volume and classified directory advertising expenses.
    Car delivery and travel -- Include charges if personal car is used in business, including
        parking, tools, buying trips, etc.
    Accounting and legal -- Outside professional services.
    Dues and subscriptions.

6. Fixed Expenses

    Rent -- List only real estate used in business.
    Depreciation -- Amortization of capital assets.
    Insurance -- Fire or liability on property or products. Include workers' compensation.
    Loan repayments -- Interest on outstanding loans.
    Licenses and permits.
    Miscellaneous -- Unspecified; small expenditures without separate accounts.

7. Net Profit (or Loss)

    (before taxes) - Subtract total expenses from gross profit.
    Taxes - Include inventory and sales tax, excise tax, real estate tax, etc.
    (after taxes) - Subtract taxes from net profit (before taxes)

Income Projection Worksheet
This following is the form that should be used to project month to month income and expenses for year one and then to provide annual projections for the next four years.

Revenue Projection

    Total net sales (TNS) $
    Costs of sales (COS) $
    Gross profit (TNS-COS=GP) $
    Gross Profit margin (GP/TNS) %

Controllable Expenses

    Salaries/wages $
    Payroll expenses $
    Legal/accounting $
    Advertising $
    Automobile $
    Office supplies $
    Dues/Subscriptions $
    Utilities $
    Other $

Fixed Expenses

    Rent $
    Depreciation $
    Insurance $
    License/permits $
    Loan payments $
    Other $

Total Expenses

    Net profit (loss) before taxes (GP-Expenses) $
    Taxes $
    Net profit (loss) after taxes $

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