How to Create a Pro Forma in 4 Steps
- Calculate revenue projections for your business. Make sure to use realistic market assumptions to write an accurate pro forma statement.
- Estimate your total liabilities and costs. Your liabilities are loans and lines of credit.
- Estimate cash flows.
- Create the chart of accounts.
Are pro forma statements used for cash budgeting?
A pro forma statement and a cash budget are tools used for planning in companies. A pro forma statement projects future amounts a company expects. A cash budget works alongside the pro forma statement by planning a budget for the future.
What is pro forma cash budget?
A pro forma budget forecasts revenues and expenses in advance for a particular project, such as a merger, loan, bankruptcy, new debt or equity payments. A pro forma operating budget depicts the anticipated results of the proposed change, including the projected cash flows, net revenues and taxes.
How does a pro forma cash flow statement work?
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.
Can a budget be based on a pro forma statement?
Think of it this way: A pro forma statement is a prediction, and a budget is a plan. Your budget may be based on what your pro forma statements say—after all, it makes sense to make plans based on your predictions. For example: Your income this year is $37,000.
How to write an accurate pro forma statement?
Calculate revenue projections for your business. Make sure to use realistic market assumptions to write an accurate pro forma statement. Research and speak to experts to determine what a normal annual revenue stream is, as well as cash flow and asset accumulation. Estimate your total liabilities and costs.
How to create 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.
