Profit And Loss And Balance Sheets Page 14
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26PROFIT AND LOSS FORECAST
A profit forecast should show what level of profit you expect your
business to produce at the end of the period.
A profit and loss forecast or account is not
A profit and loss account will use actual
based on money or cash alone but rather
figures, apportioning costs to particular
on the value (positive or negative) of what’s
periods and particular activities. You
been going on in the business during a
should always keep notes on how you have
particular period. For instance, a quarterly
worked out the profit and loss statement.
profit and loss account would include the
value of a sale or an order undertaken in
the period even if the customer had not
Notes On Producing A
paid for it. Similarly, the costs of running
Profit And Loss Forecast
the business should include (for instance)
.
Estimate the amount of income and
a calculation of your power costs even if
expenditure you expect to generate this
the business hasn’t paid its utility bill.
month. VAT should be excluded from
The profit and loss calculation is fairly
these figures if you are, or expect to be,
simple at heart, though can be complex
VAT registered.
for large businesses. It’s based on the
.
When estimating sales take into account
following formula:
seasonal variations such as Christmas,
bad weather and holiday periods etc.
Total income
100
You should analyse your sales by product
-
-
groups as they may have different markets
Direct expenditure
20
and therefore different sales patterns.
=
=
Sales usually will build up slowly. Be
Gross profit
80
realistic rather than optimistic.
-
-
.
Overhead expenditure
50
Show any other business income expected
=
=
e.g. grants etc. If you’re aiming for full
Net profit before tax
30
financial viability, calculate the profit and
loss before receiving any grant revenue
- its shows you how far you have to go
A forecast will obviously be a ’guesstimate’
or whether the business will ever be
but the figures used should be based on
financially sustainable.
real information and hard facts about costs,
processes, production levels and so on.
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