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Write Your Business Plan | Part 1 Overview Video
The Basics of Writing a Business Plan
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12 Reasons You Need a Business Plan
The Main Objectives of a Business Plan
What to Include and Not Include in a Successful Business Plan
The Top 4 Types of Business Plans
A Step-by-Step Guide to Presenting Your Business Plan in 10 Slides
6 Tips for Making a Winning Business Presentation
12 Ways to Set Realistic Business Goals and Objectives
3 Key Things You Need to Know About Financing Your Business
How to Perfectly Pitch Your Business Plan in 10 Minutes
How to Fund Your Business Through Friends and Family Loans and Crowdsourcing
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How to Fund Your Business With an SBA Loan
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How to Fund Your Business With Venture Capital
How to Fund Your Business With Angel Investors
How to Use Your Business Plan to Track Performance
How to Make Your Business Plan Attractive to Prospective Partners
Is This Idea Going to Work? How to Assess the Potential of Your Business.
When to Update Your Business Plan
How to Write the Management Team Section to Your Business Plan
How to Create a Strategic Hiring Plan
How to Write a Business Plan Executive Summary That Sells Your Idea
How to Build a Team of Outside Experts for Your Business
Use This Worksheet to Write a Product Description That Sells
What Is Your Unique Selling Proposition? Use This Worksheet to Find Your Greatest Strength.
How to Raise Money With Your Business Plan
Customers and Investors Don't Want Products. They Want Solutions.
5 Essential Elements of Your Industry Trends Plan
How to Identify and Research Your Competition
Who Is Your Ideal Customer? 4 Questions to Ask Yourself.
How to Identify Market Trends in Your Business Plan
How to Define Your Product and Set Your Prices
How to Determine the Barriers to Entry for Your Business
How to Get Customers in Your Store and Drive Traffic to Your Website
How to Effectively Promote Your Business to Customers and Investors
What Equipment and Facilities to Include in Your Business Plan
How to Write an Income Statement for Your Business Plan
How to Make a Balance Sheet
How to Make a Cash Flow Statement
How to Use Financial Ratios to Understand the Health of Your Business
How to Write an Operations Plan for Retail and Sales Businesses
How to Make Realistic Financial Forecasts
How to Write an Operations Plan for Manufacturers
What Technology Needs to Include In Your Business Plan
How to List Personnel and Materials in Your Business Plan
The Role of Franchising
The Best Ways to Follow Up on a Buisiness Plan
The Best Books, Sites, Trade Associations and Resources to Get Your Business Funded and Running
How to Hire the Right Business Plan Consultant
Business Plan Lingo and Resources All Entrepreneurs Should Know
How to Write a Letter of Introduction
What To Put on the Cover Page of a Business Plan
How to Format Your Business Plan
6 Steps to Getting Your Business Plan In Front of Investors

How to Write an Income Statement for Your Business Plan Your income statement shows investors if you are making money. Here's everything you'll need to create one.

By Eric Butow • Oct 27, 2023

Key Takeaways

An income statement is your business's bottom line: your total revenue from sales minus all of your costs.

Opinions expressed by Entrepreneur contributors are their own.

This is part 2 / 11 of Write Your Business Plan: Section 5: Organizing Operations and Finances series.

Financial data is always at the back of the business plan, but that doesn't mean it's any less important than up-front material such as the description of the business concept and the management team. Astute investors look carefully at the charts, tables, formulas, and spreadsheets in the financial section because they know that this information is like the pulse, respiration rate, and blood pressure in a human being. It shows the condition of the patient. In fact, you'll find many potential investors taking a quick peek at the numbers before reading the plan.

Related: How to Make Realistic Financial Forecasts

Financial statements come in threes: income statement, balance sheet, and cash flow statement. Taken together they provide an accurate picture of a company's current value, plus its ability to pay its bills today and earn a profit going forward. This information is very important to business plan readers.

Why You Need an Income Statement

In his article, How to Do a Monthly Income Statement Analysis That Fuels Growth , Noah Parsons writes: "In short, you use your income statement to fuel a greater analysis of the financial standing of your business. It helps you identify any top-level issues or opportunities that you can then dive into with forecast scenarios and by looking at elements of your other financial documentation.

Related: How to Make a Balance Sheet

You want to leverage your income statement to understand if you're performing better, worse or as expected. This is done by comparing it to your sales and expense forecasts through a review process known as plan vs actuals comparison. You then update projections to match actual performance to better showcase how your business will net out moving forward."

What Is In an Income Statement

An income statement shows whether you are making any money. It adds up all your revenue from sales and other sources, subtracts all your costs, and comes up with the net income figure, also known as the bottom line.

Related: How to Make a Cash Flow Statement

Income statements are called various names—profit and loss statement (P&L) and earnings statement are two common alternatives. They can get pretty complicated in their attempt to capture sources of income, such as interest, and expenses, such as depreciation. But the basic idea is pretty simple: If you subtract costs from income, what you have left is profit.

To figure out your income statement, you need to gather a bunch of numbers, most of which are easily obtainable. They include your gross revenue, which is made up of sales and any income from interest or sales of assets; your sales, general, and administrative (SG&A) expenses; what you paid out in interest and dividends, if anything; and your corporate tax rate. If you have those, you're ready to go.

Related: Tips and Strategies for Using the Balance Sheet as Your Franchise Scorecard

Sales and Revenue

Revenue is all the income you receive from selling your products or services as well as from other sources such as interest income and sales of assets.

Gross Sales

Your sales figure is the income you receive from selling your product or service. Gross sales equals total sales minus returns. It doesn't include interest or income from sales of assets.

Interest and Dividends

Most businesses have a little reserve fund they keep in an interest-bearing bank or money market account. Income from this fund, as well as from any other interest-paying or dividend-paying securities they own, shows up on the income statement just below the sales figure.

Related: How to Measure Franchise Success With Your Income Statement

Other Income

If you finally decide that the branch office out on County Line Road isn't ever going to turn a decent profit, and you sell the land, building, and fixtures, the income from that sale will show up on your income statement as "other income." Other income may include sales of unused or obsolete equipment or any income-generating activity that's not part of your main line of business.

Costs come in all varieties—that's no secret. You'll record variable costs, such as the cost of goods sold, as well as fixed costs—rent, insurance, maintenance, and so forth. You'll also record costs that are a little trickier, the prime example being depreciation.

Related: How to Use Financial Ratios to Understand the Health of Your Business

Cost of Goods Sold

Cost of goods sold, or COGS, includes expenses associated directly with generating the product or service you're selling. If you buy smartphone components and assemble them, your COGS will include the price of the chips, screen, and other parts, as well as the wages of those doing the assembly. You'll also include supervisor salaries and utilities for your factory. If you're a solo professional service provider, on the other hand, your COGS may amount to little more than whatever salary you pay yourself and whatever technology you may use for your business.

Related: My Company Hears Hundreds of Pitches Every Year — Here's What Investors Are Actually Looking For.

Sales, General, and Administrative Costs

You have some expenses that aren't closely tied to sales volume, including salaries for office personnel, salespeople compensation, rent, insurance, and the like. These are split out from the sales-sensitive COGS figure and included on a separate line.

Depreciation

Depreciation is one of the most baffling pieces of accounting wizardwork. It's a paper loss, a way of subtracting over time the cost of a piece of equipment or a building that lasts many years even though it may get paid for immediately.

Related: 10 Mistakes to Avoid When Pitching Investors (Infographic)

Depreciation isn't an expense that involves cash coming out of your pocket. Yet it's a real expense in an accounting sense, and most income statements will have an entry for depreciation coming off the top of pretax earnings. It refers to an ongoing decrease in asset value.

If you have capital items that you are depreciating, such as an office in your home or a large piece of machinery, your accountant will be able to set up a schedule for depreciation. Each year, you'll take a portion of the purchase price of that item off your earnings statement. Although it hurts profits, depreciation can reduce future taxes.

Paying the interest on loans is another expense that gets a line all to itself and comes out of earnings just before taxes are subtracted. This line doesn't include payments against the principal. Because these payments result in a reduction of liabilities—which we'll talk about in a few pages in connection with your balance sheet—they're not regarded as expenses on the income statement.

Related: How to Craft a Business Plan That Will Turn Investors' Heads

The best thing about taxes is that they're figured last, on the profits that are left after every other thing has been taken out. Tax rates vary widely according to where your company is located, how and whether state and local taxes are figured, and your special tax situation. Use previous years as a guidepost for future returns. If you are just opening your business, work carefully with your accountant to set up a system whereby you can pay the necessary taxes at regular intervals.

Buzzword: EBIT

EBIT stands for earnings before interest and taxes. It is an indicator of a company's profitability, calculated as revenue minus expenses, excluding tax and interest.

Related: Don't Make This Huge Mistake on Your Financial Model

Important Plan Note

Don't confuse sales with receipts. Your sales figure represents sales booked during the period, not necessarily money received. If your customers buy now and pay later, there may be a significant difference between sales and cash receipts.

More in Write Your Business Plan

Section 1: the foundation of a business plan, section 2: putting your business plan to work, section 3: selling your product and team, section 4: marketing your business plan, section 5: organizing operations and finances, section 6: getting your business plan to investors.

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Business Plan Income Statement: Everything You Need to Know

Business plan income statement is an important financial document, which shows a company's profitability in a given period of time. 3 min read updated on February 01, 2023

Business plan income statement is an important financial document, which shows a company's profitability in a given period of time.

Understanding an Income Statement

An income statement or a profit and loss statement helps to understand a company's sources of revenue and various items of expenses. In other words, it tells you where the money is coming from and where it's going. A glance at the income statement can tell anyone whether the business is profitable. Basically, an income statement lists out various items and amounts of revenue and expenses, with the net profit figure at the bottom.

You might have heard people talking about a company's bottom line. It's the last line in an income statement, which shows you the amount of net profit of a company in a given period of time after meeting all expenses.

This is the “profit” referred to in a profit and loss statement or the letter “P” of “P & L” account. The “loss” or “L” is the figure that appears if the total amount of expenses exceeds the total amount of revenue.

An income statement is probably the most common and standard financial statement. Another similar statement called the projected profit and loss statement is a standard financial projection tool used in business planning.

Breakdown of a Business Plan Income Statement

It's essential to include a projected income statement in your business plan. Whether you are planning for the internal purpose of the company or preparing a financial document to present before your investors, it's important to know whether you expect the business to be profitable over a specific period of time.

You should start a business plan with an executive summary, followed by other standard components. It must include a financial plan section, complete with a projected balance sheet, cash flow, and income statement. In business planning, the word “projected” is often replaced with the word “pro-forma,” but it means the same thing.

An income statement typically includes the following components:

Direct cost of sales.
Production expenses.
Gross margin.
Operating expenses.
Marketing expenses.
Depreciation .
Utility expenses.
Insurance premiums.
Payroll taxes .
Profit before interest and taxes.
Interest expenses.
Net profit.

Sales or Revenue

The top line in your income statement represents revenue from sales. It's the net sales amount remaining after deducting goods returns and sales discounts. All the direct expenses associated with sales will be deducted from this figure.

Direct Costs of Sales

The cost of goods sold includes all the direct costs incurred in making and delivering the products or services that contributed to sales. It does not include office rent, salaries, and other expenses that are not directly connected with sales.

Gross Margin or Gross Profit

Subtracting the direct cost of goods sold from the number of net sales gives you gross margin. This is the profit before considering operating expenses and taxes.

Operating Expenses

Except for the cost of goods sold, all other expenses necessary to run the business are covered under this head. Rent, utilities, payroll, and marketing costs are examples of operating expenses.

Operating expenses include marketing and administrative expenses like:

Sales salaries.
Collateral and promotions.
Advertising.
Travel, meetings, client meals, etc.
Office salaries.

Operating Income

Operating income or earnings before interest, taxes, depreciation, and amortization (EBITDA) is the most reliable indicator of a company's profitability.

If the company is making any interest payments on a loan, it should be included under this head.

Total Expenses

This is the sum total of all expenses, excluding taxes and interest.

Depreciation and Amortization

These are the expenses incurred on tangible and intangible assets. Since the assets do not lose their utility in a single accounting period, the total cost of assets is spread over their total lifetime. The cost applicable for a single accounting period is deducted from revenue as depreciation.

Net Income Before Taxes

This figure represents total earnings of the business before paying income taxes.

This item represents the amount of income tax paid or owed to the federal, state, and local governments. Some companies allocate an estimated amount of taxes they expect to pay in the future.

Net Income or Net Profit

This is the net profit of the business remaining after paying income taxes. This is the bottom line figure that tells at a glance whether a company is making profits or incurring losses.

If you need help with business plan income statement, you can post your legal need on UpCounsel's marketplace. UpCounsel accepts only the top 5 percent of lawyers to its site. Lawyers on UpCounsel come from law schools such as Harvard Law and Yale Law and average 14 years of legal experience, including work with or on behalf of companies like Google, Menlo Ventures, and Airbnb.

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How to Prepare an Income Statement

Business professional preparing an income statement

09 Dec 2021

When it comes to financial statements , each communicates specific information and is needed in different contexts to understand a company’s financial health.

The income statement is one of the most important financial statements because it details a company’s income and expenses over a specific period. This document communicates a wealth of information to those reading it—from key executives and stakeholders to investors and employees. Being able to read an income statement is important, but knowing how to generate one is just as critical.

Here’s an overview of the information found in an income statement, along with a step-by-step look at the process of preparing one for your organization.

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What Is an Income Statement?

An income statement is a financial report detailing a company’s income and expenses over a reporting period. It can also be referred to as a profit and loss (P&L) statement and is typically prepared quarterly or annually.

Income statements depict a company’s financial performance over a reporting period. Because the income statement details revenues and expenses, it provides a glimpse into which business activities brought in revenue and which cost the organization money—information investors can use to understand its health and executives can use to find areas for improvement.

Related: How to Read & Understand an Income Statement

An income statement typically includes the following information:

Revenue: How much money a business took in during a reporting period
Expenses: How much money a business spent during a reporting period
Costs of goods sold (COGS): The total costs associated with component parts of whatever product or service a company makes and sells
Gross profit: Revenue minus costs of goods sold
Operating income: Gross profit minus operating expenses
Income before taxes: Operating income minus non-operating expenses
Net income: Income before taxes
Earnings per share (EPS): Net income divided by the total number of outstanding shares
Depreciation: Value lost by assets, such as inventory, equipment, and property, over time
EBITDA: Earnings before interest, depreciation, taxes, and amortization

Related: 13 Financial Performance Measures Managers Should Monitor

Steps to Prepare an Income Statement

1. choose your reporting period.

Your reporting period is the specific timeframe the income statement covers. Choosing the correct one is critical.

Monthly, quarterly, and annual reporting periods are all common. Which reporting period is right for you depends on your goals. A monthly report, for example, details a shorter period, making it easier to apply tactical adjustments that affect the next month’s business activities. A quarterly or annual report, on the other hand, provides analysis from a higher level, which can help identify trends over the long term.

2. Calculate Total Revenue

Once you know the reporting period, calculate the total revenue your business generated during it.

If you prepare the income statement for your entire organization, this should include revenue from all lines of business. If you prepare the income statement for a particular business line or segment, you should limit revenue to products or services that fall under that umbrella.

3. Calculate Cost of Goods Sold (COGS)

Next, calculate the total cost of goods sold for any product or service that generated revenue for your business during the reporting period. This encompasses direct and indirect costs of producing and selling products or services, including:

Direct labor expenses
Material expenses
Parts or component expenses
Distribution costs
Any expense directly tied to the production of your product or service

4. Calculate Gross Profit

The next step is to determine gross profit for the reporting period. To calculate this, simply subtract the cost of goods sold from revenue.

Financial Accounting| Understand the numbers that drive business success | Learn More

5. Calculate Operating Expenses

Once you know gross profit, calculate operating expenses (OPEX).

Operating expenses are indirect costs associated with doing business. These differ from cost of goods sold because they’re not directly associated with the process of producing or distributing products or services. Examples of expenses that fall under the OPEX category include:

Office supplies

6. Calculate Income

To calculate total income, subtract operating expenses from gross profit. This number is essentially the pre-tax income your business generated during the reporting period. This can also be referred to as earnings before interest and taxes (EBIT).

7. Calculate Interest and Taxes

After calculating income for the reporting period, determine interest and tax charges.

Interest refers to any charges your company must pay on the debt it owes. To calculate interest charges, you must first understand how much money you owe and the interest rate being charged. Accounting software often automatically calculates interest charges for the reporting period.

Next, calculate your total tax burden for the reporting period. This includes local, state, and federal taxes, as well as any payroll taxes.

8. Calculate Net Income

The final step is to calculate net income for the reporting period. To do this, subtract interest and then taxes from your EBIT. The number remaining reflects your business’s available funds, which can be used for various purposes, such as being added to a reserve, distributed to shareholders, utilized for research and development, or to fuel business expansion.

Income Statement Example

Below is an example income statement for a fictional company. As you can see at the top, the reporting period is for the year that ended on Sept. 28, 2019.

Sample Income Statement, followed by a link to an alternative version

Go to the alternative version .

During the reporting period, the company made approximately $4.4 billion in total sales. It cost the business approximately $2.7 billion to achieve those sales. As a result, gross profit was about $1.6 billion.

Next, $560.4 million in selling and operating expenses and $293.7 million in general administrative expenses were subtracted. This left the company with an operating income of $765.2 million. To this, additional gains were added and losses subtracted, including $257.6 million in income tax.

At the bottom of the income statement, it’s clear the business realized a net income of $483.2 million during the reporting period.

Credential of Readiness | Master the fundamentals of business | Learn More

A Critical Skill for Business Leaders

Although the income statement is typically generated by a member of the accounting department at large organizations, knowing how to compile one is beneficial to a range of professionals.

Whether you’re an individual contributor, a member of the leadership team in a non-accounting role, or an entrepreneur who wears many hats, learning how to create an income statement can provide a deeper understanding of the financial metrics that matter to your business. It can also help improve your financial analysis capabilities .

Do you want to take your career to the next level? Consider enrolling in Financial Accounting —one of three courses comprising our Credential of Readiness (CORe) program —which can teach you the key financial topics you need to understand business performance and potential. Not sure which course is right for you? Download our free flowchart .

Data Tables

Company b income statement.

For Year Ended September 28, 2019 (In thousands)

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6 Small Business Financial Statements for Startup Financing

Financial Statements You'll Need for Your Startup Business Plan

You're ready to start your small business and your're working on a great business plan to take to a bank or other lender. A key part of that plan is the financial statements. These statements will be looked at carefully by the lender, so here are some tips for making these documents SELL your business plan .

Financial Statements You Will Need

You may need several different types of statements, depending on the requirements of your lender and your own technical expertise.

The statements you will certainly need are:

A startup budget or cash flow statement
A startup costs worksheet
A pro forma (projected) profit and loss statement
A pro forma (projected) balance sheet

Your lender may also want these financial statements:

Sources and uses of funds statement
Break-even analysis

Putting these Statements in Order

First, work on your startup budget and your startup costs worksheet. You'll need to do a lot of estimating.

The trick is to underestimate income and overestimate expenses, so you can create a more realistic picture of your business over the first year or two.

Then work on a profit and loss statement for the first year. A lender will definitely want to see this one. And, even though it's not going to be accurate, lenders like to see a startup balance sheet.

Some lenders may ask for a break-even analysis, a cash flow statement, or a sources and uses of funds statement. We'll go over these statements so you can quickly provide them if asked.

Business Startup Budget

A startup budget is like a projected cash flow statement, but with a little more guesswork.

Your lender wants to know your budget - that is, what you expect to bring in and how much to expect to spend each month. Lenders want to know that you can follow a budget and that you will not over-spend.

They also want to see how much you will need to pay your bills while your business is starting out (working capital), and how long it will take you to have a positive cash flow (bring in more money than you are spending).

Include some key information on your budget:

What products or services you are selling, including prices and estimated volumes
Key drivers for expenses, like how many employees you'll need and your marketing initiatives

A typical budget worksheet should be carried through three years, so your lender can see how you expect to generate the cash to make your monthly loan payments.

Startup Costs Worksheet

A startup costs worksheet answers the question "What do you need the money for?" In other words, it shows all the purchases you will need to make in order to open your doors for business. This could be called a "Day One" statement because it's everything you will need on your first day of business.

Facilities costs, like deposits on insurance and utilities
Office equipment, computers, phones
Supplies and advertising materials like signs and business cards
Fees to set up your business website and email
Legal fees licenses and permits

Profit and Loss Statement/Income Statement

After you have completed the monthly budget and you have gathered some other information, you should be able to complete a Profit and Loss or Income Statement. This statement shows your business activity over a specific period of time, like a month, quarter, or year.

To create this statement, you'll need to list all your sources to get your gross income over that time. Then, list all expenses for the same time.

Because you haven't started yet, this statement is a called a projected P&L, because it projects out your estimates into the future.

This statement gathers up all your sources of income, including shows your profit or loss for the year and how much tax you estimate having to pay.

Break-Even Analysis

A break-even analysis shows your lender that you know the point at which you will start making a profit or the price that will cover your fixed costs . The break-even analysis is primarily for businesses making or selling products, or to set the right price for a product or service.

It's usually shown as a graph with sales volume on the X axis and revenue on the Y axis. Then fixed an variable costs (those you must pay) are included. The break-even point marks the place where costs are covered.

This analysis can also be useful for service-type businesses to show an overall profit point for specific services. If you include a break-even analysis, be sure you can explain it.

Beginning Balance Sheet

A startup balance sheet is difficult to prepare, even if there isn't much to include. The balance sheet shows the value of the assets you have purchased for startup, how much you owe to lenders and other creditors, and any initial investments you have made to get started. The date for this spreadsheet is the day you open the business.

Sources and Uses of Funds Statement

Large businesses use Sources and Uses of Funds statements in their annual reports, but you can create a slightly different simple statement to show your lender what you need the money for, what sources you have already, and what's left over to be financed.

To create this statement, list all your startup and working capital(on-going cash needs), how much collateral you will be bringing to the business, other sources of funding, and how much you need to borrow.

Optional: A Business Requirements Document

A business requirements document is similar to a proposal document, but for a larger, more complex project or startup. It gives a complete picture of the project or the business plan. It goes into more detail on the project that will be using the financial statements.

Include Financial Statements in Your Business Plan

You will need a complete startup business plan to take to a bank or other business lender. The financial statements are a key part of this plan. Give the main points in the executive summary and include all the statements in the financial section.

Finally, Check for Mistakes!

Before you submit your startup business plan and financial statements, check this list. Don't make these common business plan mistakes !

Check all numbers for accuracy and consistency. Especially make sure the amounts you are requesting are specific and that they are the same throughout all the parts of your business plan.

SCORE.org. " How to Set Up and Maintain a Budget for Your Small Business ." Accessed Sept. 10, 2020.

SCORE.org. " Financial Projections Template ." Accessed Sept. 10, 2020.

Harvard Business Review. " A Quick Guide to Breakeven Analysis ." Accessed Sept. 10, 2020.

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How to Write an Income Statement for Your Business Plan

Financial data is always at the back of the business plan, but that doesn’t mean it’s any less important than up-front material such as the description of the business concept and the management team. Astute investors look carefully at the charts, tables, formulas, and spreadsheets in the financial section because they know that this information is like the pulse, respiration rate, and blood pressure in a human being. It shows the condition of the patient. In fact, you’ll find many potential investors taking a quick peek at the numbers before reading the plan.

Financial statements come in threes: income statement, balance sheet, and cash flow statement. Taken together they provide an accurate picture of a company’s current value, plus its ability to pay its bills today and earn a profit going forward. This information is very important to business plan readers.

Why You Need an Income Statement

In his article, How to Do a Monthly Income Statement Analysis That Fuels Growth, Noah Parsons writes: “In short, you use your income statement to fuel a greater analysis of the financial standing of your business. It helps you identify any top-level issues or opportunities that you can then dive into with forecast scenarios and by looking at elements of your other financial documentation.

You want to leverage your income statement to understand if you’re performing better, worse or as expected. This is done by comparing it to your sales and expense forecasts through a review process known as plan vs actuals comparison. You then update projections to match actual performance to better showcase how your business will net out moving forward.”

What Is In an Income Statement

Sales and Revenue

Revenue is all the income you receive from selling your products or services as well as from other sources such as interest income and sales of assets.

Gross Sales

Your sales figure is the income you receive from selling your product or service. Gross sales equals total sales minus returns. It doesn’t include interest or income from sales of assets.

Interest and Dividends

Other Income

If you finally decide that the branch office out on County Line Road isn’t ever going to turn a decent profit, and you sell the land, building, and fixtures, the income from that sale will show up on your income statement as “other income.” Other income may include sales of unused or obsolete equipment or any income-generating activity that’s not part of your main line of business.

Costs come in all varieties—that’s no secret. You’ll record variable costs, such as the cost of goods sold, as well as fixed costs—rent, insurance, maintenance, and so forth. You’ll also record costs that are a little trickier, the prime example being depreciation.

Cost of Goods Sold

Cost of goods sold, or COGS, includes expenses associated directly with generating the product or service you’re selling. If you buy smartphone components and assemble them, your COGS will include the price of the chips, screen, and other parts, as well as the wages of those doing the assembly. You’ll also include supervisor salaries and utilities for your factory. If you’re a solo professional service provider, on the other hand, your COGS may amount to little more than whatever salary you pay yourself and whatever technology you may use for your business.

Sales, General, and Administrative Costs

You have some expenses that aren’t closely tied to sales volume, including salaries for office personnel, salespeople compensation, rent, insurance, and the like. These are split out from the sales-sensitive COGS figure and included on a separate line.

Depreciation

Depreciation is one of the most baffling pieces of accounting wizardwork. It’s a paper loss, a way of subtracting over time the cost of a piece of equipment or a building that lasts many years even though it may get paid for immediately.

Depreciation isn’t an expense that involves cash coming out of your pocket. Yet it’s a real expense in an accounting sense, and most income statements will have an entry for depreciation coming off the top of pretax earnings. It refers to an ongoing decrease in asset value.

If you have capital items that you are depreciating, such as an office in your home or a large piece of machinery, your accountant will be able to set up a schedule for depreciation. Each year, you’ll take a portion of the purchase price of that item off your earnings statement. Although it hurts profits, depreciation can reduce future taxes.

Paying the interest on loans is another expense that gets a line all to itself and comes out of earnings just before taxes are subtracted. This line doesn’t include payments against the principal. Because these payments result in a reduction of liabilities—which we’ll talk about in a few pages in connection with your balance sheet—they’re not regarded as expenses on the income statement.

The best thing about taxes is that they’re figured last, on the profits that are left after every other thing has been taken out. Tax rates vary widely according to where your company is located, how and whether state and local taxes are figured, and your special tax situation. Use previous years as a guidepost for future returns. If you are just opening your business, work carefully with your accountant to set up a system whereby you can pay the necessary taxes at regular intervals.

Buzzword: EBIT

EBIT stands for earnings before interest and taxes. It is an indicator of a company’s profitability, calculated as revenue minus expenses, excluding tax and interest.

Important Plan Note

Don’t confuse sales with receipts. Your sales figure represents sales booked during the period, not necessarily money received. If your customers buy now and pay later, there may be a significant difference between sales and cash receipts.

Read the full article here

Small Business Trends

How to create a business plan: examples & free template.

This is the ultimate guide to creating a comprehensive and effective plan to start a business . In today’s dynamic business landscape, having a well-crafted business plan is an important first step to securing funding, attracting partners, and navigating the challenges of entrepreneurship.

This guide has been designed to help you create a winning plan that stands out in the ever-evolving marketplace. U sing real-world examples and a free downloadable template, it will walk you through each step of the process.

Whether you’re a seasoned entrepreneur or launching your very first startup, the guide will give you the insights, tools, and confidence you need to create a solid foundation for your business.

Table of Contents

How to Write a Business Plan

Embarking on the journey of creating a successful business requires a solid foundation, and a well-crafted business plan is the cornerstone. Here is the process of writing a comprehensive business plan and the main parts of a winning business plan . From setting objectives to conducting market research, this guide will have everything you need.

Executive Summary

The Executive Summary serves as the gateway to your business plan, offering a snapshot of your venture’s core aspects. This section should captivate and inform, succinctly summarizing the essence of your plan.

It’s crucial to include a clear mission statement, a brief description of your primary products or services, an overview of your target market, and key financial projections or achievements.

Think of it as an elevator pitch in written form: it should be compelling enough to engage potential investors or stakeholders and provide them with a clear understanding of what your business is about, its goals, and why it’s a promising investment.

Example: EcoTech is a technology company specializing in eco-friendly and sustainable products designed to reduce energy consumption and minimize waste. Our mission is to create innovative solutions that contribute to a cleaner, greener environment.

Our target market includes environmentally conscious consumers and businesses seeking to reduce their carbon footprint. We project a 200% increase in revenue within the first three years of operation.

Overview and Business Objectives

In the Overview and Business Objectives section, outline your business’s core goals and the strategic approaches you plan to use to achieve them. This section should set forth clear, specific objectives that are attainable and time-bound, providing a roadmap for your business’s growth and success.

It’s important to detail how these objectives align with your company’s overall mission and vision. Discuss the milestones you aim to achieve and the timeframe you’ve set for these accomplishments.

This part of the plan demonstrates to investors and stakeholders your vision for growth and the practical steps you’ll take to get there.

Example: EcoTech’s primary objective is to become a market leader in sustainable technology products within the next five years. Our key objectives include:

Introducing three new products within the first two years of operation.
Achieving annual revenue growth of 30%.
Expanding our customer base to over 10,000 clients by the end of the third year.

Company Description

The Company Description section is your opportunity to delve into the details of your business. Provide a comprehensive overview that includes your company’s history, its mission statement, and its vision for the future.

Highlight your unique selling proposition (USP) – what makes your business stand out in the market. Explain the problems your company solves and how it benefits your customers.

Include information about the company’s founders, their expertise, and why they are suited to lead the business to success. This section should paint a vivid picture of your business, its values, and its place in the industry.

Example: EcoTech is committed to developing cutting-edge sustainable technology products that benefit both the environment and our customers. Our unique combination of innovative solutions and eco-friendly design sets us apart from the competition. We envision a future where technology and sustainability go hand in hand, leading to a greener planet.

Define Your Target Market

Defining Your Target Market is critical for tailoring your business strategy effectively. This section should describe your ideal customer base in detail, including demographic information (such as age, gender, income level, and location) and psychographic data (like interests, values, and lifestyle).

Elucidate on the specific needs or pain points of your target audience and how your product or service addresses these. This information will help you know your target market and develop targeted marketing strategies.

Example: Our target market comprises environmentally conscious consumers and businesses looking for innovative solutions to reduce their carbon footprint. Our ideal customers are those who prioritize sustainability and are willing to invest in eco-friendly products.

Market Analysis

The Market Analysis section requires thorough research and a keen understanding of the industry. It involves examining the current trends within your industry, understanding the needs and preferences of your customers, and analyzing the strengths and weaknesses of your competitors.

This analysis will enable you to spot market opportunities and anticipate potential challenges. Include data and statistics to back up your claims, and use graphs or charts to illustrate market trends.

This section should demonstrate that you have a deep understanding of the market in which you operate and that your business is well-positioned to capitalize on its opportunities.

Example: The market for eco-friendly technology products has experienced significant growth in recent years, with an estimated annual growth rate of 10%. As consumers become increasingly aware of environmental issues, the demand for sustainable solutions continues to rise.

Our research indicates a gap in the market for high-quality, innovative eco-friendly technology products that cater to both individual and business clients.

SWOT Analysis

A SWOT analysis in your business plan offers a comprehensive examination of your company’s internal and external factors. By assessing Strengths, you showcase what your business does best and where your capabilities lie.

Weaknesses involve an honest introspection of areas where your business may be lacking or could improve. Opportunities can be external factors that your business could capitalize on, such as market gaps or emerging trends.

Threats include external challenges your business may face, like competition or market changes. This analysis is crucial for strategic planning, as it helps in recognizing and leveraging your strengths, addressing weaknesses, seizing opportunities, and preparing for potential threats.

Including a SWOT analysis demonstrates to stakeholders that you have a balanced and realistic understanding of your business in its operational context.

Innovative and eco-friendly product offerings.
Strong commitment to sustainability and environmental responsibility.
Skilled and experienced team with expertise in technology and sustainability.

Weaknesses:

Limited brand recognition compared to established competitors.
Reliance on third-party manufacturers for product development.

Opportunities:

Growing consumer interest in sustainable products.
Partnerships with environmentally-focused organizations and influencers.
Expansion into international markets.
Intense competition from established technology companies.
Regulatory changes could impact the sustainable technology market.

Competitive Analysis

In this section, you’ll analyze your competitors in-depth, examining their products, services, market positioning, and pricing strategies. Understanding your competition allows you to identify gaps in the market and tailor your offerings to outperform them.

By conducting a thorough competitive analysis, you can gain insights into your competitors’ strengths and weaknesses, enabling you to develop strategies to differentiate your business and gain a competitive advantage in the marketplace.

Example: Key competitors include:

GreenTech: A well-known brand offering eco-friendly technology products, but with a narrower focus on energy-saving devices.

EarthSolutions: A direct competitor specializing in sustainable technology, but with a limited product range and higher prices.

By offering a diverse product portfolio, competitive pricing, and continuous innovation, we believe we can capture a significant share of the growing sustainable technology market.

Organization and Management Team

Provide an overview of your company’s organizational structure, including key roles and responsibilities. Introduce your management team, highlighting their expertise and experience to demonstrate that your team is capable of executing the business plan successfully.

Showcasing your team’s background, skills, and accomplishments instills confidence in investors and other stakeholders, proving that your business has the leadership and talent necessary to achieve its objectives and manage growth effectively.

Example: EcoTech’s organizational structure comprises the following key roles: CEO, CTO, CFO, Sales Director, Marketing Director, and R&D Manager. Our management team has extensive experience in technology, sustainability, and business development, ensuring that we are well-equipped to execute our business plan successfully.

Products and Services Offered

Describe the products or services your business offers, focusing on their unique features and benefits. Explain how your offerings solve customer pain points and why they will choose your products or services over the competition.

This section should emphasize the value you provide to customers, demonstrating that your business has a deep understanding of customer needs and is well-positioned to deliver innovative solutions that address those needs and set your company apart from competitors.

Example: EcoTech offers a range of eco-friendly technology products, including energy-efficient lighting solutions, solar chargers, and smart home devices that optimize energy usage. Our products are designed to help customers reduce energy consumption, minimize waste, and contribute to a cleaner environment.

Marketing and Sales Strategy

In this section, articulate your comprehensive strategy for reaching your target market and driving sales. Detail the specific marketing channels you plan to use, such as social media, email marketing, SEO, or traditional advertising.

Describe the nature of your advertising campaigns and promotional activities, explaining how they will capture the attention of your target audience and convey the value of your products or services. Outline your sales strategy, including your sales process, team structure, and sales targets.

Discuss how these marketing and sales efforts will work together to attract and retain customers, generate leads, and ultimately contribute to achieving your business’s revenue goals.

This section is critical to convey to investors and stakeholders that you have a well-thought-out approach to market your business effectively and drive sales growth.

Example: Our marketing strategy includes digital advertising, content marketing, social media promotion, and influencer partnerships. We will also attend trade shows and conferences to showcase our products and connect with potential clients. Our sales strategy involves both direct sales and partnerships with retail stores, as well as online sales through our website and e-commerce platforms.

Logistics and Operations Plan

The Logistics and Operations Plan is a critical component that outlines the inner workings of your business. It encompasses the management of your supply chain, detailing how you acquire raw materials and manage vendor relationships.

Inventory control is another crucial aspect, where you explain strategies for inventory management to ensure efficiency and reduce wastage. The section should also describe your production processes, emphasizing scalability and adaptability to meet changing market demands.

Quality control measures are essential to maintain product standards and customer satisfaction. This plan assures investors and stakeholders of your operational competency and readiness to meet business demands.

Highlighting your commitment to operational efficiency and customer satisfaction underlines your business’s capability to maintain smooth, effective operations even as it scales.

Example: EcoTech partners with reliable third-party manufacturers to produce our eco-friendly technology products. Our operations involve maintaining strong relationships with suppliers, ensuring quality control, and managing inventory.

We also prioritize efficient distribution through various channels, including online platforms and retail partners, to deliver products to our customers in a timely manner.

Financial Projections Plan

In the Financial Projections Plan, lay out a clear and realistic financial future for your business. This should include detailed projections for revenue, costs, and profitability over the next three to five years.

Ground these projections in solid assumptions based on your market analysis, industry benchmarks, and realistic growth scenarios. Break down revenue streams and include an analysis of the cost of goods sold, operating expenses, and potential investments.

This section should also discuss your break-even analysis, cash flow projections, and any assumptions about external funding requirements.

By presenting a thorough and data-backed financial forecast, you instill confidence in potential investors and lenders, showcasing your business’s potential for profitability and financial stability.

This forward-looking financial plan is crucial for demonstrating that you have a firm grasp of the financial nuances of your business and are prepared to manage its financial health effectively.

Example: Over the next three years, we expect to see significant growth in revenue, driven by new product launches and market expansion. Our financial projections include:

Year 1: $1.5 million in revenue, with a net profit of $200,000.
Year 2: $3 million in revenue, with a net profit of $500,000.
Year 3: $4.5 million in revenue, with a net profit of $1 million.

These projections are based on realistic market analysis, growth rates, and product pricing.

Income Statement

The income statement , also known as the profit and loss statement, provides a summary of your company’s revenues and expenses over a specified period. It helps you track your business’s financial performance and identify trends, ensuring you stay on track to achieve your financial goals.

Regularly reviewing and analyzing your income statement allows you to monitor the health of your business, evaluate the effectiveness of your strategies, and make data-driven decisions to optimize profitability and growth.

Example: The income statement for EcoTech’s first year of operation is as follows:

Revenue: $1,500,000
Cost of Goods Sold: $800,000
Gross Profit: $700,000
Operating Expenses: $450,000
Net Income: $250,000

This statement highlights our company’s profitability and overall financial health during the first year of operation.

Cash Flow Statement

A cash flow statement is a crucial part of a financial business plan that shows the inflows and outflows of cash within your business. It helps you monitor your company’s liquidity, ensuring you have enough cash on hand to cover operating expenses, pay debts, and invest in growth opportunities.

By including a cash flow statement in your business plan, you demonstrate your ability to manage your company’s finances effectively.

Example: The cash flow statement for EcoTech’s first year of operation is as follows:

Operating Activities:

Depreciation: $10,000
Changes in Working Capital: -$50,000
Net Cash from Operating Activities: $210,000

Investing Activities:

Capital Expenditures: -$100,000
Net Cash from Investing Activities: -$100,000

Financing Activities:

Proceeds from Loans: $150,000
Loan Repayments: -$50,000
Net Cash from Financing Activities: $100,000
Net Increase in Cash: $210,000

This statement demonstrates EcoTech’s ability to generate positive cash flow from operations, maintain sufficient liquidity, and invest in growth opportunities.

Tips on Writing a Business Plan

1. Be clear and concise: Keep your language simple and straightforward. Avoid jargon and overly technical terms. A clear and concise business plan is easier for investors and stakeholders to understand and demonstrates your ability to communicate effectively.

2. Conduct thorough research: Before writing your business plan, gather as much information as possible about your industry, competitors, and target market. Use reliable sources and industry reports to inform your analysis and make data-driven decisions.

3. Set realistic goals: Your business plan should outline achievable objectives that are specific, measurable, attainable, relevant, and time-bound (SMART). Setting realistic goals demonstrates your understanding of the market and increases the likelihood of success.

4. Focus on your unique selling proposition (USP): Clearly articulate what sets your business apart from the competition. Emphasize your USP throughout your business plan to showcase your company’s value and potential for success.

5. Be flexible and adaptable: A business plan is a living document that should evolve as your business grows and changes. Be prepared to update and revise your plan as you gather new information and learn from your experiences.

6. Use visuals to enhance understanding: Include charts, graphs, and other visuals to help convey complex data and ideas. Visuals can make your business plan more engaging and easier to digest, especially for those who prefer visual learning.

7. Seek feedback from trusted sources: Share your business plan with mentors, industry experts, or colleagues and ask for their feedback. Their insights can help you identify areas for improvement and strengthen your plan before presenting it to potential investors or partners.

FREE Business Plan Template

To help you get started on your business plan, we have created a template that includes all the essential components discussed in the “How to Write a Business Plan” section. This easy-to-use template will guide you through each step of the process, ensuring you don’t miss any critical details.

The template is divided into the following sections:

Mission statement
Business Overview
Key products or services
Target market
Financial highlights
Company goals
Strategies to achieve goals
Measurable, time-bound objectives
Company History
Mission and vision
Unique selling proposition
Demographics
Psychographics
Pain points
Industry trends
Customer needs
Competitor strengths and weaknesses
Opportunities
Competitor products and services
Market positioning
Pricing strategies
Organizational structure
Key roles and responsibilities
Management team backgrounds
Product or service features
Competitive advantages
Marketing channels
Advertising campaigns
Promotional activities
Sales strategies
Supply chain management
Inventory control
Production processes
Quality control measures
Projected revenue
Assumptions
Cash inflows
Cash outflows
Net cash flow

What is a Business Plan?

A business plan is a strategic document that outlines an organization’s goals, objectives, and the steps required to achieve them. It serves as a roadmap as you start a business , guiding the company’s direction and growth while identifying potential obstacles and opportunities.

Typically, a business plan covers areas such as market analysis, financial projections, marketing strategies, and organizational structure. It not only helps in securing funding from investors and lenders but also provides clarity and focus to the management team.

A well-crafted business plan is a very important part of your business startup checklist because it fosters informed decision-making and long-term success.

Why You Should Write a Business Plan

Understanding the importance of a business plan in today’s competitive environment is crucial for entrepreneurs and business owners. Here are five compelling reasons to write a business plan:

Attract Investors and Secure Funding : A well-written business plan demonstrates your venture’s potential and profitability, making it easier to attract investors and secure the necessary funding for growth and development. It provides a detailed overview of your business model, target market, financial projections, and growth strategies, instilling confidence in potential investors and lenders that your company is a worthy investment.
Clarify Business Objectives and Strategies : Crafting a business plan forces you to think critically about your goals and the strategies you’ll employ to achieve them, providing a clear roadmap for success. This process helps you refine your vision and prioritize the most critical objectives, ensuring that your efforts are focused on achieving the desired results.
Identify Potential Risks and Opportunities : Analyzing the market, competition, and industry trends within your business plan helps identify potential risks and uncover untapped opportunities for growth and expansion. This insight enables you to develop proactive strategies to mitigate risks and capitalize on opportunities, positioning your business for long-term success.
Improve Decision-Making : A business plan serves as a reference point so you can make informed decisions that align with your company’s overall objectives and long-term vision. By consistently referring to your plan and adjusting it as needed, you can ensure that your business remains on track and adapts to changes in the market, industry, or internal operations.
Foster Team Alignment and Communication : A shared business plan helps ensure that all team members are on the same page, promoting clear communication, collaboration, and a unified approach to achieving the company’s goals. By involving your team in the planning process and regularly reviewing the plan together, you can foster a sense of ownership, commitment, and accountability that drives success.

What are the Different Types of Business Plans?

In today’s fast-paced business world, having a well-structured roadmap is more important than ever. A traditional business plan provides a comprehensive overview of your company’s goals and strategies, helping you make informed decisions and achieve long-term success. There are various types of business plans, each designed to suit different needs and purposes. Let’s explore the main types:

Startup Business Plan: Tailored for new ventures, a startup business plan outlines the company’s mission, objectives, target market, competition, marketing strategies, and financial projections. It helps entrepreneurs clarify their vision, secure funding from investors, and create a roadmap for their business’s future. Additionally, this plan identifies potential challenges and opportunities, which are crucial for making informed decisions and adapting to changing market conditions.
Internal Business Plan: This type of plan is intended for internal use, focusing on strategies, milestones, deadlines, and resource allocation. It serves as a management tool for guiding the company’s growth, evaluating its progress, and ensuring that all departments are aligned with the overall vision. The internal business plan also helps identify areas of improvement, fosters collaboration among team members, and provides a reference point for measuring performance.
Strategic Business Plan: A strategic business plan outlines long-term goals and the steps to achieve them, providing a clear roadmap for the company’s direction. It typically includes a SWOT analysis, market research, and competitive analysis. This plan allows businesses to align their resources with their objectives, anticipate changes in the market, and develop contingency plans. By focusing on the big picture, a strategic business plan fosters long-term success and stability.
Feasibility Business Plan: This plan is designed to assess the viability of a business idea, examining factors such as market demand, competition, and financial projections. It is often used to decide whether or not to pursue a particular venture. By conducting a thorough feasibility analysis, entrepreneurs can avoid investing time and resources into an unviable business concept. This plan also helps refine the business idea, identify potential obstacles, and determine the necessary resources for success.
Growth Business Plan: Also known as an expansion plan, a growth business plan focuses on strategies for scaling up an existing business. It includes market analysis, new product or service offerings, and financial projections to support expansion plans. This type of plan is essential for businesses looking to enter new markets, increase their customer base, or launch new products or services. By outlining clear growth strategies, the plan helps ensure that expansion efforts are well-coordinated and sustainable.
Operational Business Plan: This type of plan outlines the company’s day-to-day operations, detailing the processes, procedures, and organizational structure. It is an essential tool for managing resources, streamlining workflows, and ensuring smooth operations. The operational business plan also helps identify inefficiencies, implement best practices, and establish a strong foundation for future growth. By providing a clear understanding of daily operations, this plan enables businesses to optimize their resources and enhance productivity.
Lean Business Plan: A lean business plan is a simplified, agile version of a traditional plan, focusing on key elements such as value proposition, customer segments, revenue streams, and cost structure. It is perfect for startups looking for a flexible, adaptable planning approach. The lean business plan allows for rapid iteration and continuous improvement, enabling businesses to pivot and adapt to changing market conditions. This streamlined approach is particularly beneficial for businesses in fast-paced or uncertain industries.
One-Page Business Plan: As the name suggests, a one-page business plan is a concise summary of your company’s key objectives, strategies, and milestones. It serves as a quick reference guide and is ideal for pitching to potential investors or partners. This plan helps keep teams focused on essential goals and priorities, fosters clear communication, and provides a snapshot of the company’s progress. While not as comprehensive as other plans, a one-page business plan is an effective tool for maintaining clarity and direction.
Nonprofit Business Plan: Specifically designed for nonprofit organizations, this plan outlines the mission, goals, target audience, fundraising strategies, and budget allocation. It helps secure grants and donations while ensuring the organization stays on track with its objectives. The nonprofit business plan also helps attract volunteers, board members, and community support. By demonstrating the organization’s impact and plans for the future, this plan is essential for maintaining transparency, accountability, and long-term sustainability within the nonprofit sector.
Franchise Business Plan: For entrepreneurs seeking to open a franchise, this type of plan focuses on the franchisor’s requirements, as well as the franchisee’s goals, strategies, and financial projections. It is crucial for securing a franchise agreement and ensuring the business’s success within the franchise system. This plan outlines the franchisee’s commitment to brand standards, marketing efforts, and operational procedures, while also addressing local market conditions and opportunities. By creating a solid franchise business plan, entrepreneurs can demonstrate their ability to effectively manage and grow their franchise, increasing the likelihood of a successful partnership with the franchisor.

Using Business Plan Software

Creating a comprehensive business plan can be intimidating, but business plan software can streamline the process and help you produce a professional document. These tools offer a number of benefits, including guided step-by-step instructions, financial projections, and industry-specific templates. Here are the top 5 business plan software options available to help you craft a great business plan.

1. LivePlan

LivePlan is a popular choice for its user-friendly interface and comprehensive features. It offers over 500 sample plans, financial forecasting tools, and the ability to track your progress against key performance indicators. With LivePlan, you can create visually appealing, professional business plans that will impress investors and stakeholders.

2. Upmetrics

Upmetrics provides a simple and intuitive platform for creating a well-structured business plan. It features customizable templates, financial forecasting tools, and collaboration capabilities, allowing you to work with team members and advisors. Upmetrics also offers a library of resources to guide you through the business planning process.

Bizplan is designed to simplify the business planning process with a drag-and-drop builder and modular sections. It offers financial forecasting tools, progress tracking, and a visually appealing interface. With Bizplan, you can create a business plan that is both easy to understand and visually engaging.

Enloop is a robust business plan software that automatically generates a tailored plan based on your inputs. It provides industry-specific templates, financial forecasting, and a unique performance score that updates as you make changes to your plan. Enloop also offers a free version, making it accessible for businesses on a budget.

5. Tarkenton GoSmallBiz

Developed by NFL Hall of Famer Fran Tarkenton, GoSmallBiz is tailored for small businesses and startups. It features a guided business plan builder, customizable templates, and financial projection tools. GoSmallBiz also offers additional resources, such as CRM tools and legal document templates, to support your business beyond the planning stage.

Business Plan FAQs

What is a good business plan.

A good business plan is a well-researched, clear, and concise document that outlines a company’s goals, strategies, target market, competitive advantages, and financial projections. It should be adaptable to change and provide a roadmap for achieving success.

What are the 3 main purposes of a business plan?

The three main purposes of a business plan are to guide the company’s strategy, attract investment, and evaluate performance against objectives. Here’s a closer look at each of these:

It outlines the company’s purpose and core values to ensure that all activities align with its mission and vision.
It provides an in-depth analysis of the market, including trends, customer needs, and competition, helping the company tailor its products and services to meet market demands.
It defines the company’s marketing and sales strategies, guiding how the company will attract and retain customers.
It describes the company’s organizational structure and management team, outlining roles and responsibilities to ensure effective operation and leadership.
It sets measurable, time-bound objectives, allowing the company to plan its activities effectively and make strategic decisions to achieve these goals.
It provides a comprehensive overview of the company and its business model, demonstrating its uniqueness and potential for success.
It presents the company’s financial projections, showing its potential for profitability and return on investment.
It demonstrates the company’s understanding of the market, including its target customers and competition, convincing investors that the company is capable of gaining a significant market share.
It showcases the management team’s expertise and experience, instilling confidence in investors that the team is capable of executing the business plan successfully.
It establishes clear, measurable objectives that serve as performance benchmarks.
It provides a basis for regular performance reviews, allowing the company to monitor its progress and identify areas for improvement.
It enables the company to assess the effectiveness of its strategies and make adjustments as needed to achieve its objectives.
It helps the company identify potential risks and challenges, enabling it to develop contingency plans and manage risks effectively.
It provides a mechanism for evaluating the company’s financial performance, including revenue, expenses, profitability, and cash flow.

Can I write a business plan by myself?

Yes, you can write a business plan by yourself, but it can be helpful to consult with mentors, colleagues, or industry experts to gather feedback and insights. There are also many creative business plan templates and business plan examples available online, including those above.

We also have examples for specific industries, including a using food truck business plan , salon business plan , farm business plan , daycare business plan , and restaurant business plan .

Is it possible to create a one-page business plan?

Yes, a one-page business plan is a condensed version that highlights the most essential elements, including the company’s mission, target market, unique selling proposition, and financial goals.

How long should a business plan be?

A typical business plan ranges from 20 to 50 pages, but the length may vary depending on the complexity and needs of the business.

What is a business plan outline?

A business plan outline is a structured framework that organizes the content of a business plan into sections, such as the executive summary, company description, market analysis, and financial projections.

What are the 5 most common business plan mistakes?

The five most common business plan mistakes include inadequate research, unrealistic financial projections, lack of focus on the unique selling proposition, poor organization and structure, and failure to update the plan as circumstances change.

What questions should be asked in a business plan?

A business plan should address questions such as: What problem does the business solve? Who is the specific target market ? What is the unique selling proposition? What are the company’s objectives? How will it achieve those objectives?

What’s the difference between a business plan and a strategic plan?

A business plan focuses on the overall vision, goals, and tactics of a company, while a strategic plan outlines the specific strategies, action steps, and performance measures necessary to achieve the company’s objectives.

How is business planning for a nonprofit different?

Nonprofit business planning focuses on the organization’s mission, social impact, and resource management, rather than profit generation. The financial section typically includes funding sources, expenses, and projected budgets for programs and operations.

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Free Small Business Income Statements, Spreadsheets, and Templates

By Andy Marker | April 6, 2022

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We’ve compiled a collection of the most helpful small business income statements, worksheets, and templates for small business owners and other stakeholders, free to download.

Included on this page, you’ll find a small business income statement template , a small business balance sheet and income statement template , a simple small business cash flow template , and a small business comparative income statement . Plus, you’ll find helpful tips on using a small business income statement template .

Printable Small Business Income and Expenses Template

Download Printable Small Business Income and Expenses Template Microsoft Excel | Microsoft Word | Adobe PDF | Google Sheets

Use this printable small business income and expenses template to determine your net income over a period of time. Enter values into the customizable line-item rows, and the template will calculate your revenue and cost of goods sold (COGS) to determine your gross profit. Enter your expenses (such as rent, utilities, and office supplies) to see your total net income. This template is a great tool to track your business's finances over time.

Read our article on free small business expense templates to find additional resources and to get the most out of your small business budgeting.

Yearly Small Business Income Statement Template

Download Yearly Small Business Income Statement Template Microsoft Excel | Google Sheets

Use this yearly small business income statement template to manage your profit and losses over a three-year timeline. Track your costs in the customizable Expenses column, and enter your revenue and expenses to determine your net income. The template also includes a built-in tax rate calculator for a more accurate account of your net profit.

To find more resources, check out our comprehensive roundup of free profit and loss templates .

Monthly Small Business Income Statement Template

Download Monthly Small Business Income Statement Template Microsoft Excel | Google Sheets

Use this monthly small business income statement template to track and manage your small business finances. Enter the number of customers and the average sale per customer to determine your total monthly sales. Then, enter your operating, payroll, and office expenses to determine your total expenses. The template will automatically calculate these totals to show your net profit.

Sample Small Business Income Statement Template

Download Sample Small Business Income Statement Template Microsoft Excel | Google Sheets

Use this simple small business income statement template for an overall analysis of your net income. You can customize the Revenue and Expenses lines to include items specific to your business; additionally, the template includes a Years Represented column that allows you to compare numbers over a two-year timeline. This is the perfect tool for taking a quick snapshot of your business cash flow.

To find more resources, check out our small business budget templates.

Printable Monthly Small Business Income and Expenses Worksheet Template

Download Printable Monthly Small Business Income and Expenses Worksheet Template Microsoft Excel | Adobe PDF | Google Sheets

This simple, printable template is the perfect tool for tracking your business’s income, expenses, and transactions. The template includes three separate worksheets — simply enter monthly financial data, and the template will automatically calculate yearly totals. Help ensure you meet your financial goals, accurately predict projections, and make necessary adjustments with this template.

Freelance Income Statement Template

Download Freelance Income Statement Template Microsoft Excel | Google Sheets

Self-employed individuals can use this template to track their business income from clients, along with any business expenses. Enter your personalized expenses, including rent, office supplies, and insurance, to see your cash outflow. Then, enter your taxes, and the template will automatically calculate your net income. This is a must-have tool for small business owners looking to understand their business profits.

Daily Income and Expenditure Template for Small Business

Download Daily Income and Expenditure Template for Small Business Microsoft Excel | Google Sheets

For a daily analysis of your small business’s cash flow, use this template to track cash receipts, cash payments, and operating expenses. The template automatically calculates these totals on a daily basis to provide you with a detailed financial report. The template also shows your monthly ending cash position, so you can avoid any shortcomings.

Check out our profit and loss templates for more resources on tracking your business’s cash flow.

Small Business Balance Sheet and Income Statement Template

Download Small Business Balance Sheet and Income Statement Template Microsoft Excel | Google Sheets

Use this income and expenses spreadsheet to help ensure that you never lose sight of your small business’s financial outlook. Enter your revenue and expenses, and the template will automatically calculate your net income. Plus, the customizable year columns enable you to compare your net income over a five-year timeline so that you can easily forecast your business’s economic health.

Read our article on small business balance sheet templates for more resources on tracking your business expenses.

Small Business Income Statement Template

Download Small Business Income Statement Template Microsoft Excel | Google Sheets

This simple small business income statement template calculates your total revenue and expenses, including advising, equipment, and employee benefits, to determine your net income. Use this template to track and compare your finances over a two-year timeline. Save the document so that you always have quick insight into the financial status of your business.

Startup Business Income and Expenses Template

Download Startup Business Income and Expenses Template Microsoft Excel | Adobe PDF | Google Sheets

Use this startup business income and expenses template to track your business’s cash flow. Compare your budgeted expenses and funding to your actual spending to understand any discrepancies. Overall, this template can help you make well-informed, financially accurate predictions so that you can reach your business goals.

Simple Small Business Cash Flow Template

Download Simple Small Business Cash Flow Template Microsoft Excel | Google Sheets

Use this simple small business cash flow template to monitor your cash increase or decrease over a certain period of time. Enter your cash receipts, payments, COGS, and operating expenses, and the built-in formulas will calculate your total cash payments, net cash change, and month-ending cash position.

Simple Small Business Profit and Loss Template

Download Simple Small Business Profit and Loss Template Microsoft Excel | Google Sheets

Regardless of your industry, you can use this simple small business profit and loss template to analyze your business’s financial status over a specific period of time. Customize your expenses by adding or removing line items, and the built-in formulas will calculate your gross profit and net income.

Read our article on small business profit and loss templates to find additional resources and to get the most out of your small business’s profit and loss tracking.

Small Business Comparative Income Template

Download Small Business Comparative Income Template Microsoft Excel | Google Sheets

Use this detailed small business comparative template to closely maintain watch over your financial position. Enter line items for income and expenses to compare your budget to actual calculations. With detailed use, this template will enable you to never lose sight of your business's cash flow.

What Is a Small Business Income Statement Template?

A small business income statement template is a financial statement used to report performance. Templates include calculations for revenue, expenses, and overall profit and loss, and they are used to document, analyze, and project business finances.

If you are a current or prospective small business owner, it’s imperative that you track your income and expenses, as doing so will ensure you have accurate information regarding how your company spends and makes money. An income statement template helps you to identify areas of risk and patterns in profit and loss, and to make educated decisions around your budget.

A small business income statement template typically includes the following line items for tracking your business's financial status:

Budget: A budget is a spending plan for your business based on your estimated income and expenses.
Cash Ending Position: This refers to the money your business has at any specific point in time.
Cash Flow: This is the amount of money that moves in and out of your business.
Cost of Goods Sold (COGS): This is any money spent that is associated with your product, such as packaging and labor.
Expenses: List anything on which you spend money to run your business, such as rent, advertising, equipment, insurance, phone, and employee salaries.
Gross Profit: Determine this number by subtracting the COGS from your total sales.
Gross Revenue: The formula to calculate gross revenue is total revenue less the COGS.
Income: List anything that brings money into your business, such as sales and donations.
Net Income or Net Profit: This number reflects the amount earned from sales.
Revenue: Calculate revenue by adding together the total amount of income made by sales and services.
Tax: This includes any mandatory monetary contributions made to the government.

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How to prepare an income statement for a small business

A small business owner sitting at her kitchen table uses a laptop to prepare an income statement.

What’s an income statement?

Why is an income statement important, your reporting period, the type of income statement you need, how to create a single-step income statement, how to create a multi-step income statement, one step at a time, small business income statement template, example of a single-step income statement, example of a multi-step income statement, keep your business organized for easy reporting.

An income statement details revenue and expenses to provide insights into a business’s financial performance during a period of time.

Read on to learn what an income statement is, what it includes, why it’s important, and how to make an income statement for your small business. We’ve even included a free small business income statement template you can use.

Also referred to as a profit and loss (P&L) statement, an income statement is one of three main financial reports a business of any size needs to prepare, alongside the balance sheet and cash flow statement .

An income statement gives insights into your business’s operations, how efficiently it is being managed, what departments are underperforming, and how well it’s doing compared to the competition.

The income statement calculates the company’s net income or net profit by taking into account its earnings, gains, expenses, and losses over a period. A balance sheet, on the other hand, only lists the fiscal situation on a specific date.

Unlike a cash flow statement, an income statement includes the full sums of all sales and purchases, whether they were done in cash or credit. This means that an expense is listed in full, even if you’re paying for it in installments or with net terms after the end of the reporting period. The same goes for revenue, which is listed whether it was collected yet or not.

A properly prepared income statement gives business owners a clear picture of the company’s financial position.

Using the income statement, a business owner can adjust their business plan according to the company’s actual performance. They can also explore which business activities produce the most revenue and profit

to assess their viability and contribution to the business’s overall health.

An income statement is also a viable tool for figuring out the balance between expense management and additional investment. In other words, which expenses can be cut back and where you should invest more. And, it helps find areas for improvement, for example, a business activity that has potential but is suffering from inefficiencies.

What’s included in an income statement

When you prepare an income statement, there are four main categories to take into account: revenue, gains, expenses, and losses.

These are used to calculate the company’s gross profit Profit Profit is the earnings that remain after you deduct expenses from revenues. Net profit is what’s left when all types of expenses are deducted from sales. Gross profit is what’s left after deducting the costs associated with making and selling the products, or the costs associated with providing services. and net income for the reporting period.

Revenue includes:

Operating revenue. This refers to revenue directly linked to sales from your primary business activities. Depending on your industry and specialties these can be goods, services, or both. For example, if you own a coffee shop, all the coffee, pastries, and teas you sell at the shop, go into your operating revenue.
Non-operating revenue. Recurring revenue driven from secondary non-core activity. This can be for example, from interest on your savings in the bank, renting out unused space, selling branded merchandise, or ad space in public areas of your establishment. If we go back to the coffee shop example, the money from ads hanging in the bathroom or from selling reusable takeaway cups goes under non-operating revenue.
Returns and concessions. This item has a negative value as it represents sales that have been canceled for whatever reason and need to be deducted from your revenue.

Unlike revenue, gains refer to non-recurring income. It is typically generated not from the sale of goods or services but from other non-core business activities such as the sale of a branch, property, and used equipment or winning a lawsuit or insurance claim.

These are relatively rare activities, especially for a small business, so they may not apply for every period.

All money spent during the reporting period including:

Cost of goods (COGS) . The total costs directly associated with producing or acquiring goods for sale or providing a service.
Operating expenses. Costs directly linked to sales related to your primary business activity. This includes marketing, payroll, packaging, etc.
Non-operating expenses. All expenses not directly related to the core activity but essential to the general management of the company. For example, cleaning, rent, overhead, office supplies, etc.
Income tax. The total amount of taxes owed for the business’s income during the reporting period.
Interest. The total amount of interest your business incurred for loans and other forms of debt over the period.

Losses can include:

Depreciation. The lost value of assets over time due to wear and tear, outdated technology, or other factors. Depreciation is a percentage of the asset’s original cost that is deducted every year to reflect this decline.
Legal remedies. Losses that occur when a company loses a court case or reaches a settlement requiring it to pay another party.

How to create an income statement

Before you can start preparing your income statement, you first need to figure out two things:

Income statements are usually produced for a 12-month period but some companies may choose shorter time spans, for example, quarterly or even monthly statements.

A longer reporting period gives a better picture of your business performance without the fleeting effects of seasonality.

A shorter period, on the other hand, gives you more oversight for quickly adjusting your strategy according to the performance. During times of transition, it may be beneficial to produce more frequent reports.

When deciding your reporting period, also examine when it should begin or end. For simplicity, many businesses choose to do annual reports beginning January 1st and ending December 31st.

However, companies sometimes define their fiscal year independently from the calendar year. This means, for example, that their annual report may cover a year ending on June 30th instead.

Regardless of what you choose, it’s important to clearly state your reporting period at the top of your income statement.

There are two types of income statements:

A single-step income statement in which all expenses and losses are bundled together and deducted from all revenues and gains.

A multi-step income statement in which you separate operating income and expenses from non-operating income and expenses to get a better picture of the performance of your various business activities.

Generally speaking, a single-step income statement is usually enough for small and medium-sized businesses (SMBs) that have a simple business structure and a single core activity.

A multi-step statement would be a better fit for larger businesses with diverse business activities and multiple departments.

That said, if your SMB is looking to secure a loan or any other type of financing, you may be required to produce a multi-step statement as well.

Contrary to what the phrase single-step might suggest, there are a few steps you need to take to prepare your income statement:

Add up all your revenue and gains.
Add up all your expenses and losses.
Deduct your expenses and losses from your revenue and gains to reach your income before tax and interest (EBIT).
Add up your tax and interest.
Deduct tax and interest from EBIT to reach net profit.

As you’ve probably already figured out, a multi-step statement has a lot more steps.

Here’s how to do an income statement using the multi-step method:

Step 1: Operating revenue Add up all your revenue from sales during the reporting period and deduct your returns and concessions.

Step 2: Cost of goods sold (COGS)

Add up all expenses directly related to the manufacturing or acquisition of goods sold or the provision of services to determine your COGS.

Step 3: Gross profit

Deduct your COGS from the operating revenue.

Step 4: Operating expenses

Add up all operating costs incurred in the reported period. Remember that this should not include COGS, which are already accounted for.

Step 5: Total operating income

Deduct the operational expenses from your gross profit.

Step 6: Non-operating revenue

Add up all income from non-core activities.

Step 7: Non-operating expenses

Add up all expenses for non-core activities.

Step 8: Non-operating income

Subtract non-operating expenses from non-operating revenue.

Step 9: Gains and losses

Add up all your gains then deduct your losses.

Step 10: Income before tax and interest (EBIT)

Add gains and losses to non-operating income and operating income to reach your EBIT.

Step 11: Taxes and interest

Add up the income tax for the reporting period and the interest incurred for debt during that time.

Step 12: Net profit

Subtract the taxes and interest from your EBIT to reach net profit.

Handling financial statements can be overwhelming for anyone, especially small business owners who are more passionate about serving their customers than about spreadsheets and numbers.

To save you time, we’ve prepared an income statement template for small businesses to leverage.

It comes in a spreadsheet format (.xlsx) that you can open with Microsoft Excel, Google Sheets, or any other compatible spreadsheet program you’re used to.

In the file, you’ll find two sheets to choose from: one for a single-step income statement and the other for a multi-step statement. All you have to do is fill out your company’s information. We’ve already put in the formulas so all the calculations are done automatically.

Feel free to change the description of the items to fit your business. You can also add or delete lines as needed.

Download the free small business income statement template here.

Income statement examples

In case you’re confused, here are examples of what an income statement using both methods would look like for a pet supply store called Rocky’s Pet Supplies.

We used Melio’s income statement template to create both versions. As you can see, the numbers are the same but the way they are presented is quite different.

Here’s what Rocky’s Pet Supplies’ single-step income statement for 2023 looks like.

A single-step income statement example for fictional business Rocky's Pet Supplies.

Here’s what Rocky’s Pet Supplies’ multi-step income statement for 2023 looks like.

A multi-step income statement example for fictional business Rocky's Pet Supplies.

Using an online payment platform like Melio to pay your business bills makes it easy to find all your expenses when it’s time to make an income statement. Sign up for Melio today to start sending digital payments to all your vendors.

P.S. Don’t forget to pick up our small business income statement template.

*This blog post is intended for informational purposes only and is not intended as financial advice. **Melio does not provide legal, tax or accounting advice, and you should consult with a professional advisor before making any financial decisions.

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The importance of financial planning for small businesses

A solid financial strategy serves as a short and long-term reminder of what your business is aiming for and a guide for getting there.

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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.

Finish Your Business Plan Today!

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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Income Statement Templates

Get in-depth insight of your business performance with income statement. download these easy to use example income statement templates..

What is Income Statement?

An income statement gives an overview of a company’s income and expenses. It is a type of financial statement used to evaluate the company’s performance in the short term. Since most other financial statements are prepared annually or biannually, an income statement is also created monthly or quarterly. An income statement is also called a profit and loss statement, earnings statement, or statement of operations.

An income statement helps managers and investors make decisions in the short term. It helps assess the company’s growth trajectory.

The income statement is primarily used for measuring profitability, not cash flow.

Why use an income Statement

An Income Statement is prepared monthly and quarterly. Unlike other financial statements and reports, the income statement gives business profitability information on a monthly basis. A monthly report can help identify immediate threats and opportunities and a business can avoid nose dive.

You can also use this income statement template in financial planning of your business plan . Having a template for income statement will save you time and hassle in writing your business plan .

Investors may also ask for income statements in addition to the balance sheet and other financial reports. The reason is the same as the income statement focuses more on the short term.

Income Statement Template for Business Plan

A forecast income statement is an essential part of a business plan. Along with cash flow statement and balance sheet, income statement makes the financial planning part of the business plan.

This income statement template for business plan can be used without any additional changes; download income statement template, populate it with forecast numbers and your income statement for business plan is ready.

Download Free Income Income Statement Templates

There are two basic types of income statements, Single-step income statements, and multi-step income statements. Here is a short side-by-side comparison of the two. When you are unsure about it, use Single Step Income Statement.

We have prepared these three income statement templates. You can also download income statement excel format. You can also use the income statement template for business plan.

Basic Single Step Income Statement

Traditional Income Statement

Multi-step income statement

Download single or simple income statement template in excel format here. Put in your business numbers in the templates and see how your business is doing!

Download Single Step Income Statement Template Excel

Traditional income statement is easy to use. Download the traditional income statement template and make financial statement for your business.

Download Traditional Income Statement Template

Multi Step Income Statement gives an in-depth analysis of your business. Download this free multi step income statement template to look closely into your business performance.

Download Multi Step Income Statement Template

Comparison of Single Step Income Statement vs Multi Step Income Statement

A single step income statement is prepared with simple accounting equation that subtracts ‘losses and expenses’ from ‘revenues and gains’. Whereas the multi step income statements also include the the expenses and revenues from non-operational resources and follows a three step approach to calculate net income. An example of income statement will include all the list items mentioned here.

Income Statement Formula

In one line, the income statement formula is:

“ total revenues – total expanses= Net income”

An income statement gives a comparison and overview of the company’s revenue and expenses. It helps understand the business growth trajectory in the short term.

If your business’s revenues are greater than the expenses, your company is making a profit. Whereas, if your expenses are more than your revenues, your company needs to look closely into the income statement and take the necessary steps for making it profitable again.

The income statement displays the net profitability of a business. It serves as a tool for investors and owners and it shows the company’s profitability.

An income statement is a better financial report for checking the performance of a business in the short run.

What goes on an income statement?

For most businesses, the income statement items will be different. However, the structure stays the same. Most templates can be used for any industry after a few changes. You will find these list items on any income statement example.

Cost of Goods Manufactured
Gross Margin
Amortization
Depreciation
Rent expense
Salaries and Wages
Phone and internet
Operating Income (EBIT)
Interest Expense
Earnings Before Tax (EBT)

How to Prepare an Income Statement?

We have provided simple income statement templates and you can use them as guidelines for preparing an income statement. Our templates are compatible with Microsoft Excel; you can download and use them for your business.

The following steps will be helpful for you in preparing an income statement.

1. Select a Reporting Period

An income report shows revenues and expenses for a certain time period. You can choose any time period from one month to many years.

Mostly income statement is created on a monthly, quarterly, bi-annually, or yearly basis. Most companies create monthly income statements to keep a close eye on their performance.

2. Prepare a Trial Balance Report

You will need to create a standard trial balance report for creating an income report. A trial balance report gives end balance numbers for each account which is necessary for the income statement. If you are using an accounting tool, you can easily prepare and print out the trial balance report in a few clicks.

3. Calculate Revenue

Next, you will need to calculate all the revenues your firm has earned in the selected time period. Revenues will include everything you have earned from selling your goods or services in the reporting period, whether you have received the payment or not.

4. Calculate Cost of Goods Sold

Cost of goods sold includes the labor cost, materials cost, and overhead costs you have made in offering your goods or services.

From your trial balance, add the ‘cost of goods sold items and put the number on the income statement below revenue line items.

5. Calculate Gross Margin

Subtract ‘cost of goods sold’ from ‘Revenues’ and you will have your Gross Margin number.

6. Include Operating Expenses

Take all the operating expenses line items from your trial balance and put the final number in ‘selling and administrative expanses’ in the income statement.

7. Calculate your Income

When you take out the ‘selling and administrative’ expanses from ‘Gross Income’, you will get your income before taxes.

8. Include Income Tax

Find your state’s tax rate, multiply it with your pretax income and you will get the income amount you will have to pay. The income tax number will go below the pretax income in the income statement.

Pro Tips: learn how to to calculate income tax with our income tax calculator .

9. Calculate Net Income

Take out the income tax from pretax income and you will get your net income. Your net income will give you an overview of your business performance and profitability.

10. Finalize the Income Statement

Add the ‘Income Statement’ in the header of the income statement report for easier identification. Your income statement is complete now.

In case you are using income statement template in a business plan, you will put the expected, forecast numbers in the template to prepare the income statement.

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A Profit and loss statement (P&L statement) is also called an income statement. An income statement or P&L statement is the summary of revenues, expenses, cost of goods sold, administrative expenses, and taxes for a specific time period.

Income statement and balance sheet are not the same. Both of these reports give important information about the business; an income statement gives a profit and loss assessment of a business while balance sheets tell about the financial situation of a business at a certain point in time.

Income statement can be prepared for both cash and accrual-based accounting. However, the revenues and expenses calculation method will be different as we will only be recording the revenues received and expenses made.

Income Statement shows the current profitability of a business. It details the revenues and expenses of a business. The income statement can be negative if the expenses and costs are more than the total revenue.

An income statement includes the following expenses.

Cost of goods sold- the expenses you incur for the materials and labor.

Selling, General and Administrative Expanses-this head include all indirect expenses, advertising expenses, overhead expenses, rentals, etc.

Depreciation and Amortization- Depreciation shows the decrease in the value of tangible assets like machinery, automobiles, etc; amortization is the decrease in the value of intangible assets like patents and trademarks.

Research and Development-If your business has a research and development facility, you will need to add these costs to the income statement.

There are two basic types of income statements; single-step income statements and multistep income statements. A multistep income statement has more details and includes incomes and expenses.

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How to Prepare a Financial Plan for Startup Business (w/ example)

Free Financial Statements Template

Ajay Jagtap

December 7, 2023

13 Min Read

If someone were to ask you about your business financials, could you give them a detailed answer?

Let’s say they ask—how do you allocate your operating expenses? What is your cash flow situation like? What is your exit strategy? And a series of similar other questions.

Instead of mumbling what to answer or shooting in the dark, as a founder, you must prepare yourself to answer this line of questioning—and creating a financial plan for your startup is the best way to do it.

A business plan’s financial plan section is no easy task—we get that.

But, you know what—this in-depth guide and financial plan example can make forecasting as simple as counting on your fingertips.

Ready to get started? Let’s begin by discussing startup financial planning.

What is Startup Financial Planning?

Startup financial planning, in simple terms, is a process of planning the financial aspects of a new business. It’s an integral part of a business plan and comprises its three major components: balance sheet, income statement, and cash-flow statement.

Apart from these statements, your financial section may also include revenue and sales forecasts, assets & liabilities, break-even analysis , and more. Your first financial plan may not be very detailed, but you can tweak and update it as your company grows.

Key Takeaways

Realistic assumptions, thorough research, and a clear understanding of the market are the key to reliable financial projections.
Cash flow projection, balance sheet, and income statement are three major components of a financial plan.
Preparing a financial plan is easier and faster when you use a financial planning tool.
Exploring “what-if” scenarios is an ideal method to understand the potential risks and opportunities involved in the business operations.

Why is Financial Planning Important to Your Startup?

Poor financial planning is one of the biggest reasons why most startups fail. In fact, a recent CNBC study reported that running out of cash was the reason behind 44% of startup failures in 2022.

A well-prepared financial plan provides a clear financial direction for your business, helps you set realistic financial objectives, create accurate forecasts, and shows your business is committed to its financial objectives.

It’s a key element of your business plan for winning potential investors. In fact, YC considered recent financial statements and projections to be critical elements of their Series A due diligence checklist .

Your financial plan demonstrates how your business manages expenses and generates revenue and helps them understand where your business stands today and in 5 years.

Makes sense why financial planning is important to your startup, doesn’t it? Let’s cut to the chase and discuss the key components of a startup’s financial plan.

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Key Components of a Startup Financial Plan

Whether creating a financial plan from scratch for a business venture or just modifying it for an existing one, here are the key components to consider including in your startup’s financial planning process.

Income Statement

An Income statement , also known as a profit-and-loss statement(P&L), shows your company’s income and expenditures. It also demonstrates how your business experienced any profit or loss over a given time.

Consider it as a snapshot of your business that shows the feasibility of your business idea. An income statement can be generated considering three scenarios: worst, expected, and best.

Your income or P&L statement must list the following:

Cost of goods or cost of sale
Gross margin
Operating expenses
Revenue streams
EBITDA (Earnings before interest, tax, depreciation , & amortization )

Established businesses can prepare annual income statements, whereas new businesses and startups should consider preparing monthly statements.

Cash flow Statement

A cash flow statement is one of the most critical financial statements for startups that summarize your business’s cash in-and-out flows over a given time.

This section provides details on the cash position of your business and its ability to meet monetary commitments on a timely basis.

Your cash flow projection consists of the following three components:

✅ Cash revenue projection: Here, you must enter each month’s estimated or expected sales figures.

✅ Cash disbursements: List expenditures that you expect to pay in cash for each month over one year.

✅ Cash flow reconciliation: Cash flow reconciliation is a process used to ensure the accuracy of cash flow projections. The adjusted amount is the cash flow balance carried over to the next month.

Furthermore, a company’s cash flow projections can be crucial while assessing liquidity, its ability to generate positive cash flows and pay off debts, and invest in growth initiatives.

Balance Sheet

Your balance sheet is a financial statement that reports your company’s assets, liabilities, and shareholder equity at a given time.

Consider it as a snapshot of what your business owns and owes, as well as the amount invested by the shareholders.

This statement consists of three parts: assets , liabilities, and the balance calculated by the difference between the first two. The final numbers on this sheet reflect the business owner’s equity or value.

Balance sheets follow the following accounting equation with assets on one side and liabilities plus Owner’s equity on the other:

Here is what’s the core purpose of having a balance-sheet:

Indicates the capital need of the business
It helps to identify the allocation of resources
It calculates the requirement of seed money you put up, and
How much finance is required?

Since it helps investors understand the condition of your business on a given date, it’s a financial statement you can’t miss out on.

Break-even Analysis

Break-even analysis is a startup or small business accounting practice used to determine when a company, product, or service will become profitable.

For instance, a break-even analysis could help you understand how many candles you need to sell to cover your warehousing and manufacturing costs and start making profits.

Remember, anything you sell beyond the break-even point will result in profit.

You must be aware of your fixed and variable costs to accurately determine your startup’s break-even point.

Fixed costs: fixed expenses that stay the same no matter what.
Variable costs: expenses that fluctuate over time depending on production or sales.

A break-even point helps you smartly price your goods or services, cover fixed costs, catch missing expenses, and set sales targets while helping investors gain confidence in your business. No brainer—why it’s a key component of your startup’s financial plan.

Having covered all the key elements of a financial plan, let’s discuss how you can create a financial plan for your startup.

How to Create a Financial Section of a Startup Business Plan?

1. determine your financial needs.

You can’t start financial planning without understanding your financial requirements, can you? Get your notepad or simply open a notion doc; it’s time for some critical thinking.

Start by assessing your current situation by—calculating your income, expenses , assets, and liabilities, what the startup costs are, how much you have against them, and how much financing you need.

Assessing your current financial situation and health will help determine how much capital you need for your startup and help plan fundraising activities and outreach.

Furthermore, determining financial needs helps prioritize operational activities and expenses, effectively allocate resources, and increase the viability and sustainability of a business in the long run.

Having learned to determine financial needs, let’s head straight to setting financial goals.

2. Define Your Financial Goals

Setting realistic financial goals is fundamental in preparing an effective financial plan. So, it would help to outline your long-term strategies and goals at the beginning of your financial planning process.

Let’s understand it this way—if you are a SaaS startup pursuing VC financing rounds, you may ask investors about what matters to them the most and prepare your financial plan accordingly.

However, a coffee shop owner seeking a business loan may need to create a plan that appeals to banks, not investors. At the same time, an internal financial plan designed to offer financial direction and resource allocation may not be the same as previous examples, seeing its different use case.

Feeling overwhelmed? Just define your financial goals—you’ll be fine.

You can start by identifying your business KPIs (key performance indicators); it would be an ideal starting point.

3. Choose the Right Financial Planning Tool

Let’s face it—preparing a financial plan using Excel is no joke. One would only use this method if they had all the time in the world.

Having the right financial planning software will simplify and speed up the process and guide you through creating accurate financial forecasts.

Many financial planning software and tools claim to be the ideal solution, but it’s you who will identify and choose a tool that is best for your financial planning needs.

Create a Financial Plan with Upmetrics in no time

Enter your Financial Assumptions, and we’ll calculate your monthly/quarterly and yearly financial projections.

Start Forecasting

4. Make Assumptions Before Projecting Financials

Once you have a financial planning tool, you can move forward to the next step— making financial assumptions for your plan based on your company’s current performance and past financial records.

You’re just making predictions about your company’s financial future, so there’s no need to overthink or complicate the process.

You can gather your business’ historical financial data, market trends, and other relevant documents to help create a base for accurate financial projections.

After you have developed rough assumptions and a good understanding of your business finances, you can move forward to the next step—projecting financials.

5. Prepare Realistic Financial Projections

It’s a no-brainer—financial forecasting is the most critical yet challenging aspect of financial planning. However, it’s effortless if you’re using a financial planning software.

Upmetrics’ forecasting feature can help you project financials for up to 7 years. However, new startups usually consider planning for the next five years. Although it can be contradictory considering your financial goals and investor specifications.

Following are the two key aspects of your financial projections:

Revenue Projections

In simple terms, revenue projections help investors determine how much revenue your business plans to generate in years to come.

It generally involves conducting market research, determining pricing strategy , and cash flow analysis—which we’ve already discussed in the previous steps.

The following are the key components of an accurate revenue projection report:

Market analysis
Sales forecast
Pricing strategy
Growth assumptions
Seasonal variations

This is a critical section for pre-revenue startups, so ensure your projections accurately align with your startup’s financial model and revenue goals.

Expense Projections

Both revenue and expense projections are correlated to each other. As revenue forecasts projected revenue assumptions, expense projections will estimate expenses associated with operating your business.

Accurately estimating your expenses will help in effective cash flow analysis and proper resource allocation.

These are the most common costs to consider while projecting expenses:

Fixed costs
Variable costs
Employee costs or payroll expenses
Operational expenses
Marketing and advertising expenses
Emergency fund

Remember, realistic assumptions, thorough research, and a clear understanding of your market are the key to reliable financial projections.

6. Consider “What if” Scenarios

After you project your financials, it’s time to test your assumptions with what-if analysis, also known as sensitivity analysis.

Using what-if analysis with different scenarios while projecting your financials will increase transparency and help investors better understand your startup’s future with its best, expected, and worst-case scenarios.

Exploring “what-if” scenarios is the best way to better understand the potential risks and opportunities involved in business operations. This proactive exercise will help you make strategic decisions and necessary adjustments to your financial plan.

7. Build a Visual Report

If you’ve closely followed the steps leading to this, you know how to research for financial projections, create a financial plan, and test assumptions using “what-if” scenarios.

Now, we’ll prepare visual reports to present your numbers in a visually appealing and easily digestible format.

Don’t worry—it’s no extra effort. You’ve already made a visual report while creating your financial plan and forecasting financials.

Check the dashboard to see the visual presentation of your projections and reports, and use the necessary financial data, diagrams, and graphs in the final draft of your financial plan.

Here’s what Upmetrics’ dashboard looks like:

Upmetrics financial projections visual report

8. Monitor and Adjust Your Financial Plan

Even though it’s not a primary step in creating a good financial plan, it’s quite essential to regularly monitor and adjust your financial plan to ensure the assumptions you made are still relevant, and you are heading in the right direction.

There are multiple ways to monitor your financial plan.

For instance, you can compare your assumptions with actual results to ensure accurate projections based on metrics like new customers acquired and acquisition costs, net profit, and gross margin.

Consider making necessary adjustments if your assumptions are not resonating with actual numbers.

Also, keep an eye on whether the changes you’ve identified are having the desired effect by monitoring their implementation.

And that was the last step in our financial planning guide. However, it’s not the end. Have a look at this financial plan example.

Startup Financial Plan Example

Having learned about financial planning, let’s quickly discuss a coffee shop startup financial plan example prepared using Upmetrics.

Important Assumptions

The sales forecast is conservative and assumes a 5% increase in Year 2 and a 10% in Year 3.
The analysis accounts for economic seasonality – wherein some months revenues peak (such as holidays ) and wanes in slower months.
The analysis assumes the owner will not withdraw any salary till the 3rd year; at any time it is assumed that the owner’s withdrawal is available at his discretion.
Sales are cash basis – nonaccrual accounting
Moderate ramp- up in staff over the 5 years forecast
Barista salary in the forecast is $36,000 in 2023.
In general, most cafes have an 85% gross profit margin
In general, most cafes have a 3% net profit margin

Projected Balance Sheet

Projected Cash-Flow Statement

Projected Profit & Loss Statement

Break Even Analysis

Start Preparing Your Financial Plan

We covered everything about financial planning in this guide, didn’t we? Although it doesn’t fulfill our objective to the fullest—we want you to finish your financial plan.

Sounds like a tough job? We have an easy way out for you—Upmetrics’ financial forecasting feature. Simply enter your financial assumptions, and let it do the rest.

So what are you waiting for? Try Upmetrics and create your financial plan in a snap.

Build your Business Plan Faster

with step-by-step Guidance & AI Assistance.

Frequently Asked Questions

How often should i update my financial projections.

Well, there is no particular rule about it. However, reviewing and updating your financial plan once a year is considered an ideal practice as it ensures that the financial aspirations you started and the projections you made are still relevant.

How do I estimate startup costs accurately?

You can estimate your startup costs by identifying and factoring various one-time, recurring, and hidden expenses. However, using a financial forecasting tool like Upmetrics will ensure accurate costs while speeding up the process.

What financial ratios should startups pay attention to?

Here’s a list of financial ratios every startup owner should keep an eye on:

Net profit margin
Current ratio
Quick ratio
Working capital
Return on equity
Debt-to-equity ratio
Return on assets
Debt-to-asset ratio

What are the 3 different scenarios in scenario analysis?

As discussed earlier, Scenario analysis is the process of ascertaining and analyzing possible events that can occur in the future. Startups or businesses often consider analyzing these three scenarios:

base-case (expected) scenario
Worst-case scenario
best case scenario.

About the Author

Ajay is a SaaS writer and personal finance blogger who has been active in the space for over three years, writing about startups, business planning, budgeting, credit cards, and other topics related to personal finance. If not writing, he’s probably having a power nap. Read more

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What Is an Income Statement?

Understanding the Statement

Revenue and Gains

Expenses and losses, income statement structure.

Reading Standard Statements

Uses of Income Statements

What are the four key elements of an income statement, what is the difference between operating revenue and non-operating revenue, what insights should you look for in an income statement, the bottom line.

Corporate Finance
Financial statements: Balance, income, cash flow, and equity

Income Statement: How to Read and Use It

What you need to know about this essential financial statement

James Chen, CMT is an expert trader, investment adviser, and global market strategist.

Amanda Bellucco-Chatham is an editor, writer, and fact-checker with years of experience researching personal finance topics. Specialties include general financial planning, career development, lending, retirement, tax preparation, and credit.

An income statement is one of the three important financial statements used for reporting a company’s financial performance over a specific accounting period. The other two key statements are the balance sheet and the cash flow statement .

The income statement focuses on the revenue, expenses, gains, and losses reported by a company during a particular period. Also known as the profit and loss (P&L) statement or the statement of revenue and expense, an income statement provides valuable insights into a company’s operations, the efficiency of its management, underperforming sectors, and its performance relative to industry peers.

Key Takeaways

An income statement is one of the three major financial statements, along with the balance sheet and the cash flow statement, that report a company’s financial performance over a specific accounting period.
The income statement focuses on the revenue, expenses, gains, and losses of a company during a particular period.
An income statement provides valuable insights into a company’s operations, the efficiency of its management, underperforming sectors, and its performance relative to industry peers.

Mira Norian / Investopedia

Understanding the Income Statement

The income statement is an integral part of the company performance reports that must be submitted to the U.S. Securities and Exchange Commission (SEC). While a balance sheet provides the snapshot of a company’s financials as of a particular date, the income statement reports income through a specific period, usually a quarter or a year, and its heading indicates the duration, which may read as “For the (fiscal) year/quarter ended June 30, 2021.”

Theresa Chiechi © Investopedia 2022

The income statement focuses on four key items: revenue, expenses, gains, and losses. It does not differentiate between cash and non-cash receipts (sales in cash vs. sales on credit) or cash vs. non-cash payments/disbursements (purchases in cash vs. purchases on credit). It starts with the details of sales and then works down to compute net income and eventually earnings per share (EPS) . Essentially, it gives an account of how the net revenue realized by the company gets transformed into net earnings (profit or loss).

The following are covered in the income statement, though its format may vary, depending upon the local regulatory requirements, the diversified scope of the business, and the associated operating activities:

Operating Revenue

Revenue realized through primary activities is often referred to as operating revenue . For a company manufacturing a product, or for a wholesaler, distributor, or retailer involved in the business of selling that product, the revenue from primary activities refers to revenue achieved from the sale of the product. Similarly, for a company (or its franchisees) in the business of offering services, revenue from primary activities refers to the revenue or fees earned in exchange for offering those services.

Non-Operating Revenue

Revenue realized through secondary, noncore business activities is often referred to as nonoperating, recurring revenue. This revenue is sourced from the earnings that are outside the purchase and sale of goods and services and may include income from interest earned on business capital parked in the bank, rental income from business property, income from strategic partnerships like royalty payment receipts, or income from an advertisement display placed on business property.

Also called other sundry income , gains indicate the net money made from other activities, like the sale of long-term assets. These include the net income realized from one-time nonbusiness activities, such as a company selling its old transportation van, unused land, or a subsidiary company.

Revenue should not be confused with receipts. Payment is usually accounted for in the period when sales are made, or services are delivered. Receipts are the cash received and are accounted for when the money is received.

A customer may take goods/services from a company on Sept. 28, which will lead to the revenue accounted for in September. The customer may be given a 30-day payment window due to his excellent credit and reputation, allowing until Oct. 28 to make the payment, which is when the receipts are accounted for.

A business's cost to continue operating and turning a profit is known as an expense. Some of these expenses may be written off on a tax return if they meet Internal Revenue Service (IRS) guidelines.

Primary-Activity Expenses

These are all expenses incurred for earning the average operating revenue linked to the primary activity of the business. They include the cost of goods sold (COGS); selling, general, and administrative (SG&A) expenses; depreciation or amortization ; and research and development (R&D) expenses. Typical items that make up the list are employee wages, sales commissions, and expenses for utilities such as electricity and transportation.

Secondary-Activity Expenses

These are all expenses linked to noncore business activities, like interest paid on loan money.

Losses as Expenses

These are all expenses that go toward a loss-making sale of long-term assets, one-time or any other unusual costs, or expenses toward lawsuits.

While primary revenue and expenses offer insights into how well the company’s core business is performing, the secondary revenue and fees account for the company’s involvement and expertise in managing ad hoc, non-core activities. Compared with the income from the sale of manufactured goods, a substantially high-interest income from money lying in the bank indicates that the business may not be using the available cash to its full potential by expanding the production capacity, or that it is facing challenges in increasing its market share amid competition.

Recurring rental income gained by hosting billboards at the company factory along a highway indicates that management is capitalizing upon the available resources and assets for additional profitability.

Mathematically, net income is calculated based on the following:

Net Income = (Revenue + Gains) - (Expenses + Losses)

To understand the above formula with some real numbers, let’s assume that a fictitious sports merchandise business, which additionally provides training, is reporting its income statement for a recent hypothetical quarter.

Image by Sabrina Jiang © Investopedia 2022

It received $25,800 from the sale of sports goods and $5,000 from training services. It spent various amounts listed for the given activities that total of $10,650. It realized net gains of $2,000 from the sale of an old van, and it incurred losses worth $800 for settling a dispute raised by a consumer. The net income comes to $21,350 for the given quarter. The above example is the simplest form of income statement that any standard business can generate. It is called the single-step income statement as it is based on a simple calculation that sums up revenue and gains and subtracts expenses and losses.

However, real-world companies often operate on a global scale, have diversified business segments offering a mix of products and services, and frequently get involved in mergers , acquisitions , and strategic partnerships. Such a wide array of operations, diversified set of expenses, various business activities, and the need for reporting in a standard format per regulatory compliance leads to multiple and complex accounting entries in the income statement.

Listed companies follow the multiple-step income statement, which segregates the operating revenue, operating expenses, and gains from the nonoperating revenue, nonoperating expenses, and losses, and offers many more details through the income statement produced this way.

Essentially, the different measures of profitability in a multiple-step income statement are reported at four different levels in a business's operations: gross, operating, pretax, and after-tax. As we’ll see shortly in the following example, this segregation helps in identifying how the income and profitability are moving/changing from one level to the other. For instance, high gross profit but lower operating income indicates higher expenses, while higher pretax profit and lower post-tax profit indicate loss of earnings to taxes and other one-time, unusual expenses.

Let’s look at an example based on the 2021 annual income statements of two large, publicly listed, multinational companies from different sectors: technology (Microsoft) and retail (Walmart).

Reading Income Statements

The focus in this standard format is to calculate the profit/income at each subhead of revenue and operating expenses and then account for mandatory taxes, interest, and other nonrecurring, one-time events to arrive at the net income that applies to common stock. Though calculations involve simple additions and subtractions, the order in which the various entries appear in the statement and their relationships often get repetitive and complicated. Let’s take a deep dive into these numbers for a better understanding.

Revenue Section

The first section, titled Revenue, indicates that Microsoft’s gross (annual) profit , or gross margin, for the fiscal year ending June 30, 2021, was $115.86 billion. It was arrived at by deducting the cost of revenue ($52.23 billion) from the total revenue ($168.09 billion) realized by the technology giant during this fiscal year. Just over 30% of Microsoft’s total sales went toward costs for revenue generation, while a similar figure for Walmart in its fiscal year 2021 was about 75% ($429 billion/$572.75 billion). It indicates that Walmart incurred much higher cost than Microsoft to generate equivalent sales.

Operating Expenses

The next section, called Operating Expenses, again takes into account Microsoft’s cost of revenue ($52.23 billion) and total revenue ($168.09 billion) for the fiscal year to arrive at the reported figures. As Microsoft spent $20.72 billion on R&D and $25.23 billion on SG&A expenses, total operating expenses are computed by summing all these figures ($52.23 billion + $20.72 billion + $25.23 billion = $98.18 billion).

Reducing total operating expenses from total revenue leads to operating income (or loss) of $69.92 billion ($168.09 billion - $98.18 billion). This figure represents the earnings before interest and taxes (EBIT) for its core business activities and is again used later to derive the net income.

A comparison of the line items indicates that Walmart did not spend anything on R&D and had higher SG&A and total operating expenses than Microsoft.

Income From Continuing Operations

The next section, titled Income from Continuing Operations, adds net other income or expenses (like one-time earnings), interest-linked expenses, and applicable taxes to arrive at the net income from continuing operations ($61.27 billion) for Microsoft, which is nearly 60% higher than that of Walmart ($13.67 billion).

After discounting for any nonrecurring events, it’s possible to arrive at the value of net income applicable to common shares. Microsoft had a much higher net income of $61.27 billion compared with Walmart’s $13.67 billion.

Earnings per share are computed by dividing the net income figure by the number of weighted average shares outstanding. With 7.55 billion outstanding shares for Microsoft, its 2021 EPS came to $8.12 per share ($61.27 billion ÷ 7.55 billion). With Walmart having 2.79 billion outstanding shares that fiscal year, its EPS came to $4.90 per share ($13.67 billion ÷ 2.79 billion).

Microsoft had a lower cost for generating equivalent revenue, higher net income from continuing operations, and higher net income applicable to common shares compared with Walmart.

Though the primary purpose of an income statement is to convey details of profitability and business activities of the company to the stakeholders, it also provides detailed insights into the company’s internal activities for comparison across different businesses and sectors. By understanding the income and expense components of the statement, an investor can appreciate what makes a company profitable.

Based on income statements, management can make decisions like expanding to new geographies, pushing sales, expanding production capacity, increasing the use of or the outright sale of assets, or shutting down a department or product line. Competitors also may use them to gain insights about the success parameters of a company and focus areas such as lifting R&D spending.

Creditors may find income statements of limited use, as they are more concerned about a company’s future cash flows than its past profitability. Research analysts use the income statement to compare year-on-year and quarter-on-quarter performance. One can infer, for example, whether a company’s efforts at reducing the cost of sales helped it improve profits over time, or whether management kept tabs on operating expenses without compromising on profitability.

(1) Revenue, (2) expenses, (3) gains, and (4) losses. An income statement is not a balance sheet or a cash flow statement.

Operating revenue is realized through a business' primary activity, such as selling its products. Non-operating revenue comes from ancillary sources such as interest income from capital held in a bank or income from rental of business property.

The income and expense components can help an investor learn what makes a company profitable (or not) . Competitors can use them to measure how their company compares on various measures. Research analysts use them to compare performance year-on-year and quarter-on-quarter.

An income statement provides valuable insights into various aspects of a business. It includes readings on a company’s operations, the efficiency of its management, the possible leaky areas that may be eroding profits, and whether the company is performing in line with industry peers.

AccountingTools. “ Income Statement Definition .”

Microsoft, via U.S. Securities and Exchange Commission. “ Form 10-K for the Fiscal Year Ended June 30, 2021 .”

Walmart, via U.S. Securities and Exchange Commission. “ Form 10-K for the Fiscal Year Ended January 31, 2022 .”

AccountingTools. “ Purpose of the Income Statement .”

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Audit: What It Means in Finance and Accounting, and 3 Main Types 37 of 51
Tax Accounting: Definition, Types, vs. Financial Accounting 38 of 51
Forensic Accounting: What It Is, How It's Used 39 of 51
Chart of Accounts (COA) Definition, How It Works, and Example 40 of 51
What Is a Journal in Accounting, Investing, and Trading? 41 of 51
Double Entry: What It Means in Accounting and How It's Used 42 of 51
Debit: Definition and Relationship to Credit 43 of 51
Credit: What It Is and How It Works 44 of 51
Closing Entry 45 of 51
What Is an Invoice? It's Parts and Why They Are Important 46 of 51
6 Components of an Accounting Information System (AIS) 47 of 51
Inventory Accounting: Definition, How It Works, Advantages 48 of 51
Last In, First Out (LIFO): The Inventory Cost Method Explained 49 of 51
The FIFO Method: First In, First Out 50 of 51
Average Cost Method: Definition and Formula with Example 51 of 51

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The Ultimate Guide to Income Statement for Small Business Owners

An income statement is a vital document for any business. It’s the first thing potential investors and banks want to see before considering your funding requests. Additionally, it gives a detailed overview of your business revenue and income, allowing you to make data-driven decisions to improve your profitability.

So, getting it right is vital to building your future success. Read on as we go through what an income statement looks like and how you can prepare one for your small business.

What is an income statement?

An income statement is a financial document summarizing company income and expenses during a specific accounting period. It could be monthly, quarterly, or annually.

Also known as a profit and loss document , it’s one of three financial statements a business prepares. The other two are the balance sheet and the statement of cash flows.

Income statements record the financial activities of a business by providing a glimpse into three areas:

Where you’re making money
Where you’re spending money
If the business is profitable

These are crucial figures to know. It provides a health check for your business, predicts future business trajectories, and informs decision-making by highlighting areas of concern or opportunity.

A well-prepared income statement serves to signify a financially mature company. That’s why it’s one of the first documents potential investors ask for when deciding to invest in a business.

Knowing how to create an income statement is essential to attracting investors to your small businesses and understanding where you can change your business strategies. It helps you grow, boosts ecommerce conversions , and increases your profitability.

What does an income statement look like?

An income statement reports the business revenue, expenses, and the difference between them. There are two methods of displaying this information: single-step and multi-step income statements.

Single-step

Single-step statements list all the financial documents in one column , providing only the revenue and expense section without a detailed breakdown of operating costs. It makes it easier to prepare and understand, as the only calculation is the net income. It’s the total revenue minus total expenses.

However, you need more comprehensive figures and documentation to apply for small business loans or prepare documents for investors. This is where multi-step statements come in.

While single-step statements provide a simple overview, multi-step statements give a detailed breakdown of business operating and non-operating revenue and costs, such as gross profit and pretax income.

This makes it more difficult to prepare and understand, with multiple columns, sections, and calculations required. But, it outlines the financial activities in great detail, showing your business acumen and maturity to banks and potential investors.

As well as attracting interest in your small business and raising funds easier, you can identify precisely where you’re losing or making money. For example, you might move from a transcription service to a meeting transcription app to reduce costs.

Regardless of whether you’re creating a single-step or multi-step document, there are six essential components of every income statement. Let’s take a look.

1. Sales or revenue

Sales or revenue is usually the top line of an income statement and is the total amount of money earned from business products and services. It includes all sales and revenue streams during a specific reporting period. The terms sales and revenue are used interchangeably on the top line of an income report.

You can identify the profitability of your business by looking at how revenue changes between reports. Similarly, improving revenue is the fastest way to increase your profitability.

2. Cost of goods sold (COGS)

COGS is the total amount spent to design, buy, or manufacture the products, services, goods, or components sold by the business during the reporting period. It includes all labor and material costs and is always positioned directly below the revenue line.

3. Gross profit

Also known as sales profit or gross margin, this is the amount of money earned by a business before deducting operating costs. It’s determined by subtracting the COGS from revenue.

4. Operating expenses

The business operating costs is the total amount of money spent on general and administrative expenses , such as business equipment, customer service marketing , admin overheads, or business utilities.

5. Earnings before tax

This is the amount of money your business earns before deducting tax. It highlights the financial performance of your business before tax inclusion. As taxes can fluctuate , this figure gives you a good idea of your financial standing.

6. Net income or loss

An income statement is often referred to as a profit or loss document because it ultimately shows whether the company has made a profit or loss. The net income or loss is the gross profit minus the total expenses for the specified reporting period.

How to prepare an income statement

Now you know what an income statement should look like, let’s go through the steps needed to create one for your small business.

1. Pick a timeframe to report on

The first step is choosing the reporting period for your income statement. It’s a critical decision as it can influence your decision-making process and business agility.

For instance, a monthly report gives you short-term data about your financial activities, allowing you to make rapid tactical changes for your business. Similarly, a quarterly or annual report lets you identify long-term trends and implement higher-level strategies.

While publicly traded companies must prepare financial statements on a quarterly and annual basis, there’s no requirement for small businesses. Your reporting period will depend on your business goals and what you want to achieve.

However, regular reports will provide you with the necessary information to make data-driven decisions about the future of your business. This power changes for increased efficiency, productivity, and profitability.

2. Calculate total revenue

Now you know the reporting period, you can calculate the total revenue for that timeframe. This includes all the money earned from business products, services, and revenue streams, even if you haven’t received every payment. Add the total revenue as the top line in your income statement.

3. Calculate total COGS

Next, calculate the total COGS sold by your business and list them under the revenue line in your report. This includes all direct and indirect costs associated with producing and selling business products and services:

Direct labor expenses
Material expenses
Distribution costs
Manufacturing costs
Parts or components expenses
Any expenses involved in producing and selling products or services

Using an Electronic Data Interchange ( EDI ) to manage invoices and purchase orders can be helpful during this step. It prevents transactions from being lost and reduces costly human errors, ensuring your report is accurate.

4. Calculate gross profit

This is simply total revenue minus COGS and is added to the report below total COGS.

5. Calculate operating expenses

Now add up all the operating costs of your business and add them below the gross profit line.

Operating expenses are different from COGS as it’s the indirect costs associated with doing business, such as investing in conference room technologies . It doesn’t include any expenses used to produce, distribute, or sell products or services. Some examples include:

Advertising
Office furniture or supplies
Website hosting

6. Calculate income

Your total income can be referred to as Earnings Before Interest and Taxes (EBIT) and is effectively your pretax income . It’s calculated by subtracting operating expenses from gross profit and is often listed at the bottom of your income statement.

7. Calculate interest and taxes

Once you know your pretax income, you can calculate your interest and taxes. Add this figure below the pretax on your income report.

Here, taxes refers to the local, state, federal, and payroll taxes you owe for the reporting period.

Interest refers to the money your company pays on the debts or loans during the reporting period. You must know both your interest rate and the total amount of money you owe to calculate your interest charges. Like taxes, interest rates fluctuate , so make sure to use up-to-date information for your reporting period.

While this can be a tricky step, especially for small businesses that may not have the budget for an accountant, it can be done automatically through accounting software.

8. Calculate net income

Net income is added to the final line of your income statement and is the figure that shows your business performance and profitability. Calculate it by subtracting interest and taxes from your pretax income or EBIT.

If the number is negative, you’ve made a loss. But, if it’s positive, it shows the available business funds you can use to drive your business forward, such as improving remote work operating systems , adding new product lines, or creating a rainy day fund.

9. Finalize the document

Don’t forget to add key details to finalize your report. A header identifying the document as an income statement, your business details, the date created, and the reporting period are essential additions to your document.

It will allow you to better organize and review your business performance over time.

Better understand your small business

An income statement is an essential business document. It outlines your financial activities, predicts business trajectories, and lets you apply for loans to fuel business growth.

It can be a vital strategy for your PR communications plan , providing a comprehensive and accurate report to showcase your business’s success to potential investors.

Additionally, it provides you with critical information and figures to power data-driven decisions , letting you implement effective short and long-term business strategies.

Whether you’re a busy entrepreneur or the leader of a small team, learning how to create an income statement for your small business is an immensely beneficial skill that improves your financial analysis and capabilities.

Jessica Day – Senior Director, Marketing Strategy, Dialpad

Jessica Day is the Senior Director for Marketing Strategy at Dialpad, a modern business communications platform like the hosted PBX that takes every kind of conversation to the next level—turning conversations into opportunities.

Jessica is an expert in collaborating with multifunctional teams to execute and optimize marketing efforts, for both company and client campaigns. She has also written for sites such as Globalization Partners and SME news . Here is her LinkedIn .

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Business Planning

Business Plan Financial Projections

Written by Dave Lavinsky

Financial projections are forecasted analyses of your business’ future that include income statements, balance sheets and cash flow statements. We have found them to be an crucial part of your business plan for the following reasons:

They can help prove or disprove the viability of your business idea. For example, if your initial projections show your company will never make a sizable profit, your venture might not be feasible. Or, in such a case, you might figure out ways to raise prices, enter new markets, or streamline operations to make it profitable.
Financial projections give investors and lenders an idea of how well your business is likely to do in the future. They can give lenders the confidence that you’ll be able to comfortably repay their loan with interest. And for equity investors, your projections can give them faith that you’ll earn them a solid return on investment. In both cases, your projections can help you secure the funding you need to launch or grow your business.
Financial projections help you track your progress over time and ensure your business is on track to meet its goals. For example, if your financial projections show you should generate $500,000 in sales during the year, but you are not on track to accomplish that, you’ll know you need to take corrective action to achieve your goal.

Below you’ll learn more about the key components of financial projections and how to complete and include them in your business plan.

What Are Business Plan Financial Projections?

Financial projections are an estimate of your company’s future financial performance through financial forecasting. They are typically used by businesses to secure funding, but can also be useful for internal decision-making and planning purposes. There are three main financial statements that you will need to include in your business plan financial projections:

1. Income Statement Projection

The income statement projection is a forecast of your company’s future revenues and expenses. It should include line items for each type of income and expense, as well as a total at the end.

There are a few key items you will need to include in your projection:

Revenue: Your revenue projection should break down your expected sales by product or service, as well as by month. It is important to be realistic in your projections, so make sure to account for any seasonal variations in your business.
Expenses: Your expense projection should include a breakdown of your expected costs by category, such as marketing, salaries, and rent. Again, it is important to be realistic in your estimates.
Net Income: The net income projection is the difference between your revenue and expenses. This number tells you how much profit your company is expected to make.

Sample Income Statement

2. cash flow statement & projection.

The cash flow statement and projection are a forecast of your company’s future cash inflows and outflows. It is important to include a cash flow projection in your business plan, as it will give investors and lenders an idea of your company’s ability to generate cash.

There are a few key items you will need to include in your cash flow projection:

The cash flow statement shows a breakdown of your expected cash inflows and outflows by month. It is important to be realistic in your projections, so make sure to account for any seasonal variations in your business.
Cash inflows should include items such as sales revenue, interest income, and capital gains. Cash outflows should include items such as salaries, rent, and marketing expenses.
It is important to track your company’s cash flow over time to ensure that it is healthy. A healthy cash flow is necessary for a successful business.

Sample Cash Flow Statements

3. balance sheet projection.

The balance sheet projection is a forecast of your company’s future financial position. It should include line items for each type of asset and liability, as well as a total at the end.

A projection should include a breakdown of your company’s assets and liabilities by category. It is important to be realistic in your projections, so make sure to account for any seasonal variations in your business.

It is important to track your company’s financial position over time to ensure that it is healthy. A healthy balance is necessary for a successful business.

Sample Balance Sheet

How to create financial projections.

Creating financial projections for your business plan can be a daunting task, but it’s important to put together accurate and realistic financial projections in order to give your business the best chance for success.

Cost Assumptions

When you create financial projections, it is important to be realistic about the costs your business will incur, using historical financial data can help with this. You will need to make assumptions about the cost of goods sold, operational costs, and capital expenditures.

It is important to track your company’s expenses over time to ensure that it is staying within its budget. A healthy bottom line is necessary for a successful business.

Capital Expenditures, Funding, Tax, and Balance Sheet Items

You will also need to make assumptions about capital expenditures, funding, tax, and balance sheet items. These assumptions will help you to create a realistic financial picture of your business.

Capital Expenditures

When projecting your company’s capital expenditures, you will need to make a number of assumptions about the type of equipment or property your business will purchase. You will also need to estimate the cost of the purchase.

When projecting your company’s funding needs, you will need to make a number of assumptions about where the money will come from. This might include assumptions about bank loans, venture capital, or angel investors.

When projecting your company’s tax liability, you will need to make a number of assumptions about the tax rates that will apply to your business. You will also need to estimate the amount of taxes your company will owe.

Balance Sheet Items

When projecting your company’s balance, you will need to make a number of assumptions about the type and amount of debt your business will have. You will also need to estimate the value of your company’s assets and liabilities.

Financial Projection Scenarios

Write two financial scenarios when creating your financial projections, a best-case scenario, and a worst-case scenario. Use your list of assumptions to come up with realistic numbers for each scenario.

Presuming that you have already generated a list of assumptions, the creation of best and worst-case scenarios should be relatively simple. For each assumption, generate a high and low estimate. For example, if you are assuming that your company will have $100,000 in revenue, your high estimate might be $120,000 and your low estimate might be $80,000.

Once you have generated high and low estimates for all of your assumptions, you can create two scenarios: a best case scenario and a worst-case scenario. Simply plug the high estimates into your financial projections for the best-case scenario and the low estimates into your financial projections for the worst-case scenario.

Conduct a Ratio Analysis

A ratio analysis is a useful tool that can be used to evaluate a company’s financial health. Ratios can be used to compare a company’s performance to its industry average or to its own historical performance.

There are a number of different ratios that can be used in ratio analysis. Some of the more popular ones include the following:

Gross margin ratio
Operating margin ratio
Return on assets (ROA)
Return on equity (ROE)

To conduct a ratio analysis, you will need financial statements for your company and for its competitors. You will also need industry average ratios. These can be found in industry reports or on financial websites.

Once you have the necessary information, you can calculate the ratios for your company and compare them to the industry averages or to your own historical performance. If your company’s ratios are significantly different from the industry averages, it might be indicative of a problem.

Be Realistic

When creating your financial projections, it is important to be realistic. Your projections should be based on your list of assumptions and should reflect your best estimate of what your company’s future financial performance will be. This includes projected operating income, a projected income statement, and a profit and loss statement.

Your goal should be to create a realistic set of financial projections that can be used to guide your company’s future decision-making.

Sales Forecast

One of the most important aspects of your financial projections is your sales forecast. Your sales forecast should be based on your list of assumptions and should reflect your best estimate of what your company’s future sales will be.

Your sales forecast should be realistic and achievable. Do not try to “game” the system by creating an overly optimistic or pessimistic forecast. Your goal should be to create a realistic sales forecast that can be used to guide your company’s future decision-making.

Creating a sales forecast is not an exact science, but there are a number of methods that can be used to generate realistic estimates. Some common methods include market analysis, competitor analysis, and customer surveys.

Create Multi-Year Financial Projections

When creating financial projections, it is important to generate projections for multiple years. This will give you a better sense of how your company’s financial performance is likely to change over time.

It is also important to remember that your financial projections are just that: projections. They are based on a number of assumptions and are not guaranteed to be accurate. As such, you should review and update your projections on a regular basis to ensure that they remain relevant.

Creating financial projections is an important part of any business plan. However, it’s important to remember that these projections are just estimates. They are not guarantees of future success.

Business Plan Financial Projections FAQs

What is a business plan financial projection.

A business plan financial projection is a forecast of your company's future financial performance. It should include line items for each type of asset and liability, as well as a total at the end.

What are annual income statements?

The Annual income statement is a financial document and a financial model that summarize a company's revenues and expenses over the course of a fiscal year. They provide a snapshot of a company's financial health and performance and can be used to track trends and make comparisons with other businesses.

What are the necessary financial statements?

The necessary financial statements for a business plan are an income statement, cash flow statement, and balance sheet.

How do I create financial projections?

You can create financial projections by making a list of assumptions, creating two scenarios (best case and worst case), conducting a ratio analysis, and being realistic.

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 .

Profit and Loss Statements 101 (with Template)

How much are you spending and how much are you keeping? Profit and loss statements are the key to finding out.

Understanding Income Statements vs Balance Sheets

Understanding how income statements and balance sheets work together can help you plan your business's future growth.

What is an Adjusted Trial Balance and How Do You Prepare One?

If you do your accounting own accounting, you need a trial balance. All of your raw financial information flows into it, and useful financial information flows out of it.

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Biden-Harris Administration Announces $7 Billion Solar for All Grants to Deliver Residential Solar, Saving Low-Income Americans $350 Million Annually and Advancing Environmental Justice Across America

EPA announces 60 selectees under Greenhouse Gas Reduction Fund grant competition to deliver solar to more than 900,000 low-income and disadvantaged households nationwide through the President’s Investing in America agenda

April 22, 2024

Contact: EPA Press Office ( [email protected] )

Washington – Today, April 22, as the Biden-Harris Administration celebrates Earth Day, the U.S. Environmental Protection Agency announced 60 selectees that will receive $7 billion in grant awards through the Solar for All grant competition to deliver residential solar projects to over 900,000 households nationwide. The grant competition is funded by President Biden’s Investing in America agenda through the Inflation Reduction Act, which created EPA’s $27 billion Greenhouse Gas Reduction Fund. The 60 selections under the $7 billion Solar for All program will provide funds to states, territories, Tribal governments, municipalities, and nonprofits across the country to develop long-lasting solar programs that enable low-income and disadvantaged communities to deploy and benefit from distributed residential solar, lowering energy costs for families, creating good-quality jobs in communities that have been left behind, advancing environmental justice and tackling climate change.

“Today we’re delivering on President Biden’s promise that no community is left behind by investing $7 billion in solar energy projects for over 900,000 households in low-income and disadvantaged communities,” said EPA Administrator Michael S. Regan. “The selectees will advance solar energy initiatives across the country, creating hundreds of thousands of good-paying jobs, saving $8 billion in energy costs for families, delivering cleaner air, and combating climate change.”

“Solar is the cheapest form of electricity—and one of the best ways to lower energy costs for American families,” said John Podesta, Senior Advisor to the President for International Climate Policy. “Today’s announcement of EPA’s Solar for All awards will mean that low-income communities, and not just well-off communities, will feel the cost-saving benefits of solar thanks to this investment.”

“Residential solar electricity leads to reduced monthly utility bills, reduced levels of air pollution in neighborhoods, and ultimately healthier communities, but too often low-income and disadvantaged communities have been left out. Today’s announcement will invest billions to ensure that affordable housing across the U.S. can access solar and increase energy efficiency and climate resilience,” said U.S. Department of Housing and Urban Development (HUD) Acting Secretary Adrianne Todman. “HUD is honored to have played a key role in today’s monumental announcement, which will provide meaningful household savings to households in low-income and disadvantaged communities, reduce both greenhouse gas emissions and energy costs, and deliver electricity during grid outages for low-income households.”

“Sunlight is powering millions of homes across the nation, and we're working hard to ensure Americans everywhere can benefit from this affordable clean energy resource,” said U.S. Secretary of Energy Jennifer M. Granholm. “DOE is proud to work alongside our partners at EPA and across the Federal government to help communities access the limitless energy of the sun to light their homes and power their businesses.”

“The United States can and must lead the world in transforming our energy systems away from fossil fuels,” said U.S. Senator Bernie Sanders (VT). “The Solar for All program – legislation that I successfully introduced – will not only combat the existential threat of climate change by making solar energy available to working class families, it will also substantially lower the electric bills of Americans and create thousands of good-paying jobs. This is a win for the environment, a win for consumers, and a win for the economy.”

EPA estimates that the 60 Solar for All recipients will enable over 900,000 households in low-income and disadvantaged communities to deploy and benefit from distributed solar energy. This $7 billion investment will generate over $350 million in annual savings on electric bills for overburdened households. The program will reduce 30 million metric tons of carbon dioxide equivalent emissions cumulatively, from over four gigawatts of solar energy capacity unlocked for low-income communities over five years. Solar and distributed energy resources help improve electric grid reliability and climate resilience, which is especially important in disadvantaged communities that have long been underserved.

Solar for All will deliver on the Biden-Harris Administration’s commitment to creating high-quality jobs with the free and fair choice to join a union for workers across the United States. This $7 billion investment in clean energy will generate an estimated 200,000 jobs across the country. All selected applicants intend to invest in local, clean energy workforce development programs to expand equitable pathways into family-sustaining jobs for the communities they are designed to serve. At least 35% of selected applicants have already engaged local or national unions, demonstrating how these programs will contribute to the foundation of a clean energy economy built on strong labor standards and inclusive economic opportunity for all American communities.

The Solar for All program also advances President Biden’s Justice40 Initiative , which set the goal that 40% of the overall benefits of certain federal climate, clean energy, affordable and sustainable housing, and other investments flow to disadvantaged communities that are marginalized by underinvestment and overburdened by pollution. All of the funds awarded through the Solar for All program will be invested in low-income and disadvantaged communities. The program will also help meet the President’s goal of achieving a carbon pollution-free power sector by 2035 and net-zero emissions economy by no later than 2050.

Solar for All will expand existing low-income solar programs and launch new ones. The 60 selected applicants will serve households in all 50 states, the District of Columbia, Puerto Rico, and territories, as well as increase access to solar for Tribes. EPA has selected 49 state-level awards totaling approximately $5.5 billion, six awards to serve Tribes totaling over $500 million, and five multistate awards totaling approximately $1 billion. Solar for All will deploy residential solar for households nationwide by not only providing grants and low-cost financing to overcome financial barriers to deployment but also by providing services to communities to overcome other barriers such as siting, permitting, and interconnection. A complete list of the selected applicants can be found on EPA’s Greenhouse Gas Reduction Fund Solar for All website.

The 60 selected applicants have committed to delivering on the three objectives of the Greenhouse Gas Reduction Fund: reducing climate and air pollution; delivering benefits to low-income and disadvantaged communities; and mobilizing financing to spur additional deployment of affordable solar energy. Solar for All selected applicants are expanding existing low-income solar programs and launching new programs. In at least 25 states and territories nationwide, Solar for All is launching new programs where there has never been a substantial low-income solar program before. In these geographies, Solar for All selected applicants will open new markets for distributed solar by funding new programs that provide grants and low-cost financing for low-income, residential solar.

To date, many of the 60 selected Solar for All applicants have supported low-income and underserved communities in installing innovative residential solar projects. With this new funding, selectees can launch thousands more projects like these throughout every state and territory in the nation:

The threat of storms is a major reason Athens, Georgia resident Delmira Jennings and her husband John used selected applicant Capital Good Fund's Georgia BRIGHT leasing program to install a 13-kilowatt solar and 10-kilowatt-hour battery system in February. “Last year, we spent two days without power after what seemed like a mini tornado,” Jennings said. After a recent outage, Jennings noted that she didn't even know she lost power. “The batteries kicked in and all the power items we were using were on battery backup.”
Last year, the Northern Cheyenne Tribe, whose successful pilot initiative served as the basis for selected applicant Mandan, Hidatsa, Arikara (MHA) Nation’s Northern Plains Tribal Solar for All program, took major steps toward a clean energy future with the completion of the first phase of the White River Community Solar project. This project will deploy 15 solar systems at the homes of elders while piloting a groundbreaking approach to solar ownership and management that is intended to set an example for Tribes across the nation.
Through its existing Solar on Multifamily Affordable Housing (SOMAH) program — a model for equitably providing solar to low-income renters in disadvantaged communities — selected applicant GRID Alternatives’ team in San Diego installed a solar energy system at Trolley Trestle, home to youth transitioning out of the foster care system. Energy cost savings estimated at over $600k over ten years, will be reinvested to provide additional services to those who call Trolley Trestle home, including more job and life skills training.

Review and Selection Process Information

The 60 applicants selected for funding were chosen through a competition review process. This multi-stage process included review from hundreds of experts in climate, power markets, environmental justice, labor, and consumer protection from EPA, Department of Energy, the Department of Housing and Urban Development, Department of Treasury, Department of Agriculture, the Federal Emergency Management Agency, Department of Labor, Department of Defense, Consumer Financial Protection Bureau, and the Department of Energy’s National Labs – all screened through ethics and conflict of interest checks and trained on the program requirements and evaluation criteria. Applications were scored and selected through dozens of review panels and an interagency senior review team.

EPA anticipates that awards to the selected applicants will be finalized in the summer of 2024, and selected applicants will begin funding projects through existing programs and begin expansive community outreach programs to launch new programs in the fall and winter of this year. Selections are contingent on the resolution of all administrative disputes related to the competitions.

Informational Webinars

EPA will host informational webinars as part of the program’s commitment to public transparency. EPA has scheduled a public webinar for the Solar for All program, and registration details are included below. Information on other GGRF webinars can be found on EPA’s Greenhouse Gas Reduction Fund Engagement Opportunities webpage .

Solar for All webinar: Monday, April 29, 2024, 4:00pm – 4:30pm ET. Register for the April 29 meeting

Release updated to reflect minor changes.

Houston's basic-income participants plan to spend the $500 a month on rent and groceries — but the Texas Supreme Court temporarily blocked the program

Houston's basic-income program faces shutdown after Texas' attorney general labels it "unconstitutional."
The program offers 18 monthly payments of $500 to low-income families for housing and groceries.
Uplift Harris' future remains uncertain, as it's been temporarily blocked by the Texas Supreme Court.

When Delwin Sutton learned he had been accepted into a guaranteed basic-income pilot in Houston, he signed a lease on a new apartment.

He spent almost all of his savings on his April rental fees and plans to spend his first $500 basic-income payment from Uplift Harris on rent for May: his new two-bedroom costs him $1,083 a month. He knows the GBI money will help him breathe a little easier.

The 51-year-old works in a warehouse in Harris County, which includes Houston. His hours vary, he said, and he doesn't always make enough to afford rent and groceries for himself and his wife. With GBI, Sutton hopes to become more financially secure and save money for the future.

"It's truly a blessing because people need to understand — when you live paycheck to paycheck, it's horrible," he told Business Insider. "It's almost debilitating."

The program randomly selected 1,928 eligible families out of 82,500 applicants — an acceptance rate lower than Harvard or Yale — for monthly payments, distributing $500 no-strings-attached to help them afford housing and groceries for 18 months.

The program was set to begin payments on Wednesday, but the Texas Supreme Court issued an administrative stay on the program on Tuesday afternoon. The ruling — which comes as Texas Attorney General Ken Paxton is challenging the program for being " unconstitutional" — will temporarily block Uplift Harris from distributing payments until the Court deliberates further. It is unclear when the state Supreme Court will issue a ruling.

Texas Attorney General's office originally filed suit on April 9 against Harris County, with Paxton calling Uplift Harris an "unlawful" program that "redistributes public money in a manner that violates the Texas Constitution." The filing noted that the state Constitution prohibits public funds from being given away "to benefit individuals." A district judge denied Paxton's request to pause the Houston-area program last Thursday.

Uplift Harris cannot proceed with cash payments as it awaits a decision from the state Supreme Court. For participants, there's a lot at stake.

If the GBI program is shut down completely, Sutton worries he won't have enough money to afford his new apartment. The idea of the program being canceled sends him into "panic mode."

"I'm scared that if I don't get this money, I'm going to be homeless," he said.

Uplift Harris participants hope the program will make them more financially stable

Guaranteed basic income is an increasingly popular solution to combat poverty in US cities. The programs differ from traditional Social Services because participants receive cash to spend as they choose instead of on specific categories. GBI participants have previously told BI that they used the funds to secure housing and food, pay off debt, and afford school supplies for their children.

Texas is a leader in GBI programs, but it still faces political opposition

Texas has been a key state for GBI pilots, with recent programs in Austin and San Antonio. Still, Republican lawmakers continue to challenge the programs, calling them " socialist " and worrying that the money could make low-income families too dependent on the government.

Paxton is opposing the Houston-area program because he said the Texas Constitution prohibits the state's counties and cities from granting public money to aid individuals, especially since the pilot does not limit what participants spend the money on.

Harris County Attorney Christian D. Menefee said in a statement that the Texas Supreme Court's decision to temporarily block Uplift Harris is disappointing and shows how politicized the Court has become.

"It's unfortunate the court would take such an extraordinary step to block a program that would help people in Harris County — even temporarily," Menefee said. "The Court knew that the first payments were scheduled to go out tomorrow."

Paxton has not sued other municipalities in Texas that have launched basic-income pilots. The Austin Guaranteed Income Pilot distributed $1,000 monthly to 135 low-income families, many of whom allotted money to housing, food, and other daily costs. San Antonio 's basic-income pilot, which reported similar results, gave participants $5,108 total over 25 months. El Paso County also committed to distributing $500 monthly cash payments to about 80 families.

However, Paxton's challenge to the Houston-area program mirrors GOP efforts to ban basic income in other states. The Arizona legislature is currently hearing a bill that could ban GBI, South Dakota Republicans are hoping to prohibit local governments from offering basic income, and Iowa lawmakers banned basic income programs across the state last week.

With the future of Uplift Harris' basic-income program unclear, Sutton said he worries about affording his rent and groceries. He wishes more people understood that — in his financial situation — a little bit of help goes a long way.

" Everybody that asks us for assistance doesn't want it for the rest of their lives like Mr. Paxton is trying to make it seem," Sutton said. "I want to work, I want to be better. If it's taking everything that I have just to survive, I will never be able to be better."

Editor's note: April 23, 2024 — The Texas Supreme Court temporarily blocked the program shortly after publication. This story has been updated to reflect that development.

Have you benefited from a guaranteed basic income program? Are you willing to share how the money has impacted your life? Reach out to these reporters at [email protected] and [email protected].

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Amazon’s new grocery delivery subscription offers big savings to Prime members and EBT customers

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Today, we are excited to launch a grocery delivery subscription benefit to Prime members and customers using EBT (Electronic Benefit Transfer) in over 3,500 cities and towns across the U.S.

At $9.99 per month for Prime members, this subscription—which pays for itself after just one delivery order per month—offers unlimited grocery delivery on orders over $35 across Amazon Fresh, Whole Foods Market, and a variety of local grocery and specialty retailers on Amazon.com, and even more convenient delivery and pickup options. Customers with a registered EBT card can experience the same grocery subscription benefits without a Prime membership at just $4.99 per month. A free 30-day trial is available so customers can see how this grocery delivery subscription works for them.

For one low, monthly fee, customers can shop national name brands and delicious organic and natural foods as often as they need, when they need it. The subscription includes one-hour delivery windows at no extra cost where available, unlimited 30-minute pickup on orders of any size, priority access to Recurring Reservations for a weekly grocery order, as well as unlimited delivery on $35+ orders from local grocery and specialty retailers like Cardenas Markets, Save Mart, Bartell Drugs, Rite Aid, Pet Food Express, and Mission Wine & Spirits.

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For customers who prefer to purchase their groceries more regularly—whether ordering delivery or pickup—this new grocery benefit will save them even more time and money on our vast selection of nearly 100,000 grocery items. Here are the details:

For $9.99 per month, Prime members in more than 3,500 cities and towns across the U.S. have access to unlimited grocery delivery on orders over $35 from Whole Foods Market, Amazon Fresh, and the variety of local grocery and specialty retailers available on Amazon.com. Prime members who subscribe to the new grocery delivery subscription benefit will also continue to enjoy exclusive savings in Amazon Fresh and Whole Foods Market stores —on top of all the other savings, convenience, and entertainment that come with Prime—in one single membership.
As part of Amazon's work to help low-income customers more affordably shop for groceries, customers with a registered EBT card can receive a discounted subscription fee of $4.99 per month to receive the grocery delivery subscription without a Prime membership.
Subscribers will also have access to unlimited delivery for orders over $35 from local grocery and specialty retailers like Cardenas Markets, Save Mart, Bartell Drugs, Rite Aid, Pet Food Express, Mission Wine & Spirits, and more where available.
Grocery delivery subscribers receive convenient delivery and pickup time slots for grocery orders from Whole Foods Market and Amazon Fresh. This includes one-hour delivery windows at no extra cost where available, unlimited 30-minute pickup on orders of any size, and priority access to Recurring Reservations for their weekly grocery order.
The subscription pays for itself in as little as one delivery order per month from Whole Foods Market, or one delivery order per month from Amazon Fresh for under $50.

We piloted our grocery subscription with Prime members in Columbus, Ohio; Denver, Colorado; and Sacramento, California, in late 2023. In a recent survey of grocery subscribers from the pilot, more than 85% of respondents shared that they are extremely or very satisfied with the unlimited free delivery benefit. Some of the top reasons customers shared for staying a subscriber following the trial were saving money on delivery fees, and the service making their grocery shopping experience more convenient. One customer shared, “My Whole Foods orders are truly excellent. They always do an amazing job with fresh produce and meat, and with selecting substitutions when necessary. This has made a huge impact on my satisfaction with Whole Foods grocery delivery and is the #1 reason I choose it over other delivery services.”

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Prime members and customers with a registered EBT card can learn more about how Amazon is making grocery shopping easier, faster, and more affordable through the grocery subscription benefit, and sign up here .

Prime members who shop at Amazon Fresh and Whole Foods Market can also score exclusive deals both online and in-store. Eligible Prime members can earn unlimited 5% back on their purchases when using their Prime Visa online at Amazon.com, or when shopping online or in-store at Amazon Fresh and Whole Foods Market.

Amazon is continually innovating to build a best-in-class grocery shopping experience, whether in store or online, grounded in the values Amazon is known for: price, selection, and convenience. With our portfolio of stores, including Whole Foods Market, Amazon Fresh, and Amazon Go, we offer a broad range of brands and shopping options for all customers—with extra benefits for Prime members. In addition to our own stores, we partner with grocery and specialty retailers globally, enabling customers to order delivery from their favorite stores through Amazon’s website.

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FinanceBuzz

15 Changes to 401(k)s and Retirement Accounts for 2024

Posted: April 26, 2024 | Last updated: April 26, 2024

<p>With 2024 already underway, some substantial changes to retirement plans are in effect. These modifications could significantly impact your financial strategies.</p><p>Maybe you were considering <a href="https://financebuzz.com/retire-early-quiz?utm_source=msn&utm_medium=feed&synd_slide=1&synd_postid=18051&synd_backlink_title=retiring+early&synd_backlink_position=1&synd_slug=retire-early-quiz">retiring early</a>, but the new options for saving more might make you reconsider.</p><p>Here's a breakdown of 15 key alterations that went into effect this year, including increased contribution limits and adjustments to income phase-out ranges.</p> <p> <p><a href="https://www.financebuzz.com/retire-early-quiz?utm_source=msn&utm_medium=feed&synd_slide=1&synd_postid=18051&synd_backlink_title=Retire+Sooner%3A++Take+this+quiz+to+see+if+you+can+retire+early&synd_backlink_position=2&synd_slug=retire-early-quiz"><b>Retire Sooner:</b> Take this quiz to see if you can retire early</a></p> </p>

With 2024 already underway, some substantial changes to retirement plans are in effect. These modifications could significantly impact your financial strategies.

Maybe you were considering retiring early , but the new options for saving more might make you reconsider.

Here's a breakdown of 15 key alterations that went into effect this year, including increased contribution limits and adjustments to income phase-out ranges.

Retire Sooner: Take this quiz to see if you can retire early

Retirement plan limits are up

The contribution limits for 401(k), 403(b), 457 plans, and the federal government's Thrift Savings Plan are set this year at $23,000, up from $22,500 in 2023.

This opens new avenues for individuals to engage in tax-advantaged retirement savings and reinforces the capacity to build wealth for the future.

This increase in limits not only allows for expanded contributions but serves as an opportunity to maximize tax-advantaged savings.

Each year, the IRS forgives millions in unpaid taxes. If you have more than $10,000 in tax debt, or have 3+ years of unfiled taxes, you could get forgiveness too. You might be eligible to lower the amount you owe, or eliminate your tax debt completely.

While most tax companies just put you on a payment plan and file your taxes for you, this company talks to the IRS directly . They can help you pay off your tax debt faster while potentially reducing what you owe.

<p> This year, the limit on annual contributions to an IRA stepped up to $7,000 from the previous $6,500, accompanied by an additional catch-up contribution limit of $1,000 for individuals 50 and older. </p> <p> This increase presents a golden opportunity for older individuals to fortify their IRA savings, providing an added layer of security to their retirement nest egg. </p>

Increased limit on annual IRA contributions

This year, the limit on annual contributions to an IRA stepped up to $7,000 from the previous $6,500, accompanied by an additional catch-up contribution limit of $1,000 for individuals 50 and older.

This increase presents a golden opportunity for older individuals to fortify their IRA savings, providing an added layer of security to their retirement nest egg.

Catch-up contribution limits for 401(k) and similar plans

If you're 50 and older and participating in 401(k), 403(b), and most 457 plans, here's some news: The catch-up contribution limit remains at $7,500 for 2024.

This allows you to contribute up to $30,500. At the same time, the catch-up contribution limit for employees 50 and older who participate in SIMPLE plans remains $3,500 for 2024.

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Phase-out range adjustments for workplace retirement plan contributions

The phase-out range for singles with workplace retirement plans increased to between $77,000 and $87,000, up from between $73,000 and $83,000.

That means more people might now qualify for tax-saving opportunities, turning your higher income into potential tax advantages.

Individuals in higher income brackets can still enjoy the benefits of tax advantages, but this adjustment means that even more people might now be eligible for these tax-saving opportunities.

<p> For married couples filing jointly, if the contributing spouse is covered by a workplace retirement plan, the phase-out range now stands between $123,000 and $143,000, up from the previous $116,000 to $136,000. </p> <p> Couples can now optimize their tax strategies by contributing to IRAs, taking advantage of the updated phase-out range, and making the most of potential tax benefits. </p>

Phase-out range changes for IRA contributions

For married couples filing jointly, if the contributing spouse is covered by a workplace retirement plan, the phase-out range now stands between $123,000 and $143,000, up from the previous $116,000 to $136,000.

Couples can now optimize their tax strategies by contributing to IRAs, taking advantage of the updated phase-out range, and making the most of potential tax benefits.

<p> For an IRA contributor married to someone covered by a workplace retirement plan, the phase-out range is now $230,000 to $240,000, an increase from the previous range of $218,000 to $228,000. </p><p>Couples can continue diversifying their retirement savings, making the most of potential tax benefits within the adjusted phase-out range. </p> <p> <a href="https://www.financebuzz.com/top-high-yield-savings-accounts?utm_source=msn&utm_medium=feed&synd_slide=7&synd_postid=18051&synd_backlink_title=Earn+More%3A+Boost+your+savings+with+one+of+the+best+high+yield+savings+accounts&synd_backlink_position=6&synd_slug=top-high-yield-savings-accounts"><b>Earn More:</b> Boost your savings with one of the best high yield savings accounts</a> </p>

IRA contributions for non-covered spouses

For an IRA contributor married to someone covered by a workplace retirement plan, the phase-out range is now $230,000 to $240,000, an increase from the previous range of $218,000 to $228,000.

Couples can continue diversifying their retirement savings, making the most of potential tax benefits within the adjusted phase-out range.

Earn More: Boost your savings with one of the best high yield savings accounts

<p> The phase-out range for a married individual filing a separate return covered by a workplace retirement plan remains between $0 and $10,000 and is not subject to an annual cost of living adjustment. </p> <p> This range allows for some contribution benefits for married individuals filing separately, catering to unique financial situations. </p>

Changes for married individuals filing separately

The phase-out range for a married individual filing a separate return covered by a workplace retirement plan remains between $0 and $10,000 and is not subject to an annual cost of living adjustment.

This range allows for some contribution benefits for married individuals filing separately, catering to unique financial situations.

<p> The income phase-out range for individual taxpayers making contributions to a Roth IRA is now between $146,000 and $161,000 for singles and heads of household, up from the previous $138,000 to $153,000. </p> <p> The expanded income range enables more individuals to contribute to Roth IRAs, offering tax-free growth potential in retirement. </p>

Increased income phase-out range for Roth IRA contributions

The income phase-out range for individual taxpayers making contributions to a Roth IRA is now between $146,000 and $161,000 for singles and heads of household, up from the previous $138,000 to $153,000.

The expanded income range enables more individuals to contribute to Roth IRAs, offering tax-free growth potential in retirement.

<p> For married couples filing jointly, the income phase-out range for Roth IRA contributions is increased to between $230,000 and $240,000, up from the previous $218,000 to $228,000. </p> <p> Also, the phase-out range for a married individual filing a separate return who contributes to a Roth IRA is not subject to an annual cost-of-living adjustment and remains between $0 and $10,000. </p> <p> <a href="https://www.financebuzz.com/seniors-throw-money-away-tp?utm_source=msn&utm_medium=feed&synd_slide=10&synd_postid=18051&synd_backlink_title=Avoid+These+Money+Mistakes%3A+6+ways+seniors+are+throwing+away+money+every+day&synd_backlink_position=7&synd_slug=seniors-throw-money-away-tp"><b>Avoid These Money Mistakes:</b> 6 ways seniors are throwing away money every day</a> </p>

Changes in income phase-out range for married couples

For married couples filing jointly, the income phase-out range for Roth IRA contributions is increased to between $230,000 and $240,000, up from the previous $218,000 to $228,000.

Also, the phase-out range for a married individual filing a separate return who contributes to a Roth IRA is not subject to an annual cost-of-living adjustment and remains between $0 and $10,000.

Avoid These Money Mistakes: 6 ways seniors are throwing away money every day

<p> Also known as the Retirement Savings Contributions Credit, the income limit for the Saver's Credit (designated for workers with low and moderate incomes) is increased to $76,500 for married couples filing jointly, up from $73,000. </p><p>The limit is $57,375 for heads of household, up from $54,750, and $38,250 for singles and married individuals filing separately, up from $36,500. </p> <p> Workers with lower and moderate incomes can now enjoy increased Saver's Credit benefits, encouraging more individuals to save for retirement. </p>

Changes in income limit for the Saver's Credit

Also known as the Retirement Savings Contributions Credit, the income limit for the Saver's Credit (designated for workers with low and moderate incomes) is increased to $76,500 for married couples filing jointly, up from $73,000.

The limit is $57,375 for heads of household, up from $54,750, and $38,250 for singles and married individuals filing separately, up from $36,500.

Workers with lower and moderate incomes can now enjoy increased Saver's Credit benefits, encouraging more individuals to save for retirement.

Enhanced contribution limits for SIMPLE retirement accounts

The amount individuals can contribute to their SIMPLE retirement accounts is increased to $16,000, up from the previous $15,500.

This boost in contribution limits allows individuals covered by SIMPLE plans to accelerate their savings and build a more robust retirement fund and a brighter financial future for themselves.

Qualifying longevity annuity contract limitations

Under the Secure 2.0 Act, the limitation on premiums paid for qualifying longevity annuity contracts remains at $200,000 for 2024.

This limitation ensures that individuals can strategically incorporate longevity annuities into their retirement plans without exceeding a specified premium amount.

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Deductible limit adjustment on charitable distributions

The Secure 2.0 Act introduced the deductible limit on charitable distributions, which increased to $105,000 for 2024 from $100,000.

This adjustment offers individuals greater flexibility in making charitable contributions directly from their retirement accounts, potentially optimizing their tax positions and doing some good at the same time.

<p> Also, under the Secure 2.0 Act, the deductible limit for a one-time election to treat a distribution from an individual retirement account made directly by the trustee to other entities increased to $53,000 for 2024, up from $50,000. </p> <p> This adjustment provides additional options for charitable giving, allowing individuals to make strategic decisions about their IRA distributions to benefit split-interest entities. </p>

Deductible limit for a one-time election on IRA distributions to split-interest entities

Also, under the Secure 2.0 Act, the deductible limit for a one-time election to treat a distribution from an individual retirement account made directly by the trustee to other entities increased to $53,000 for 2024, up from $50,000.

This adjustment provides additional options for charitable giving, allowing individuals to make strategic decisions about their IRA distributions to benefit split-interest entities.

Bottom line

As you navigate these new changes to retirement plans, it's crucial to assess how they align with your financial goals and retirement strategy.

Are you capitalizing on heightened contribution limits? Have you contemplated adjustments to your income and Roth IRA contributions?

Reflecting on these modifications can help fine-tune your retirement plan. Remember, the more you save today, the better positioned you'll be to retire comfortably tomorrow.

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How to Write an Income Statement for Your Business Plan
An income statement is your business's bottom line: your total revenue from sales minus all of your costs. Opinions expressed by Entrepreneur contributors are their own. This is part 2 / 11 of ...
Business Plan Financial Templates
This financial plan projections template comes as a set of pro forma templates designed to help startups. The template set includes a 12-month profit and loss statement, a balance sheet, and a cash flow statement for you to detail the current and projected financial position of a business. ‌. Download Startup Financial Projections Template.
Why The Income Statement Is Crucial To Your Business
In the pizza parlor example, the revenue in the income statement represents all the money earned from sales of all food and drink for each year. Revenue in year one totaled $300,000 and in year ...
Business Plan Income Statement: Everything You Need to Know
Business plan income statement is an important financial document, which shows a company's profitability in a given period of time. Understanding an Income Statement. An income statement or a profit and loss statement helps to understand a company's sources of revenue and various items of expenses. In other words, it tells you where the money ...
How to Write the Financial Section of a Business Plan
Use the numbers that you put in your sales forecast, expense projections, and cash flow statement. "Sales, lest cost of sales, is gross margin," Berry says. "Gross margin, less expenses, interest ...
How to Prepare an Income Statement
Steps to Prepare an Income Statement. 1. Choose Your Reporting Period. Your reporting period is the specific timeframe the income statement covers. Choosing the correct one is critical. Monthly, quarterly, and annual reporting periods are all common. Which reporting period is right for you depends on your goals.
Business Plan Essentials: Writing the Financial Plan
The financial section of your business plan determines whether or not your business idea is viable and will be the focus of any investors who may be attracted to your business idea. The financial section is composed of four financial statements: the income statement, the cash flow projection, the balance sheet, and the statement of shareholders ...
Financial Statements for Business Plans and Startup
Financial Statements You Will Need. A startup budget or cash flow statement. A startup costs worksheet. A pro forma (projected) profit and loss statement. A pro forma (projected) balance sheet. Sources and uses of funds statement. Break-even analysis.
Your Income Statement Guide: Examples, Advice and Definitions
It lists assets and liabilities as well as equity. Both statements provide important information for understanding the overall financial health of a business. Using Your Income Statement to Create a Financial Plan. Creating a financial plan using your income statement is an important step in planning for future success.
How to Write an Income Statement for Your Business Plan
An income statement shows whether you are making any money. It adds up all your revenue from sales and other sources, subtracts all your costs, and comes up with the net income figure, also known as the bottom line. Income statements are called various names—profit and loss statement (P&L) and earnings statement are two common alternatives ...
How to Create a Business Plan: Examples & Free Template
Tips on Writing a Business Plan. 1. Be clear and concise: Keep your language simple and straightforward. Avoid jargon and overly technical terms. A clear and concise business plan is easier for investors and stakeholders to understand and demonstrates your ability to communicate effectively. 2.
Small Business Income Statement Templates
A small business income statement template is a financial statement used to report performance. Templates include calculations for revenue, expenses, and overall profit and loss, and they are used to document, analyze, and project business finances. ... Budget: A budget is a spending plan for your business based on your estimated income and ...
Sample Business Plan Income Statement
An income statement summarizes your revenue and costs and shows your net profit in your business plan. Take a look at how a gift shop called Broad Street Emporium uses income statements to manage business finances. The figure shows the company's annual revenues, costs, and profits for the most recent year as well as for the previous year.
How to prepare an income statement for a small business
Add up all your gains then deduct your losses. Step 10: Income before tax and interest (EBIT) Add gains and losses to non-operating income and operating income to reach your EBIT. Step 11: Taxes and interest. Add up the income tax for the reporting period and the interest incurred for debt during that time.
Simple Income Statement Template (In Excel)
Without an income statement in your business plan, it is almost impossible to receive funding for your business, as investors will want to know exactly how much money your business has earned or lost in order to make an investment decision. By having a clear and up-to-date profit and loss statement in your business plan, you can provide ...
Pro Forma Business Plan Template & Financial Statements
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 ...
Income Statement Templates
10. Finalize the Income Statement. Add the 'Income Statement' in the header of the income statement report for easier identification. Your income statement is complete now. In case you are using income statement template in a business plan, you will put the expected, forecast numbers in the template to prepare the income statement.
How to Prepare a Financial Plan for Startup Business (w/ example)
Revenue - Expenses = Profit / Loss. Consider it as a snapshot of your business that shows the feasibility of your business idea. An income statement can be generated considering three scenarios: worst, expected, and best. Your income or P&L statement must list the following: Cost of goods or cost of sale.
Income Statement
A Real Example of an Income Statement. Below is an example of Amazon's consolidated statement of operations, or income statement, for the years ended December 31, 2015 - 2017. Take a look at the P&L and then read a breakdown of it below. Source: amazon.com. Learn to analyze an income statement in CFI's Financial Analysis Fundamentals Course.
Income Statement: How to Read and Use It
Income Statement: An income statement is a financial statement that reports a company's financial performance over a specific accounting period . Financial performance is assessed by giving a ...
The Ultimate Guide to Income Statement for Small Business Owners
An income statement reports the business revenue, expenses, and the difference between them. There are two methods of displaying this information: single-step and multi-step income statements. ... It can be a vital strategy for your PR communications plan, providing a comprehensive and accurate report to showcase your business's success to ...
Business Plan Financial Projections
There are three main financial statements that you will need to include in your business plan financial projections: 1. Income Statement Projection. The income statement projection is a forecast of your company's future revenues and expenses. It should include line items for each type of income and expense, as well as a total at the end.
Pro Forma Financial Statements (with Templates and Examples)
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.
8 Steps to Creating a Profit and Loss Statement
Step 1: Calculate revenue. The first step in creating a profit and loss statement is to calculate all the revenue your business has received. You can obtain current account balances from your ...
Balance Sheet vs. Income Statement: What's the Difference?
The new retained earnings balance is $225,000 ($160,500 beginning balance + $842,000 revenue - $430,500 expenses). The effect on retained earnings is $64,500 ($225,000 - $160,500), the company ...
What are Financial Projections and Why Do You Need Them?
Three financial statements --a balance sheet, income statement, and cash-flow statement -- are required for any financial projections you create. New businesses need financial projections, too.
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How to Write an Income Statement for Your Business Plan Your income statement shows investors if you are making money. Here's everything you'll need to create one.

Key Takeaways

Why You Need an Income Statement

What Is In an Income Statement

Sales and Revenue

Gross Sales

Interest and Dividends

Other Income

Cost of Goods Sold

Sales, General, and Administrative Costs

Depreciation

Buzzword: EBIT

Important Plan Note

More in Write Your Business Plan

Business Plan Income Statement: Everything You Need to Know

Understanding an Income Statement

Breakdown of a Business Plan Income Statement

Sales or Revenue

Direct Costs of Sales

Gross Margin or Gross Profit

Operating Expenses

Operating Income

Total Expenses

Depreciation and Amortization

Net Income Before Taxes

Net Income or Net Profit

Business Insights

How to Prepare an Income Statement

What Is an Income Statement?

Steps to Prepare an Income Statement

2. Calculate Total Revenue

3. Calculate Cost of Goods Sold (COGS)

4. Calculate Gross Profit

5. Calculate Operating Expenses

6. Calculate Income

7. Calculate Interest and Taxes

8. Calculate Net Income

Income Statement Example

A Critical Skill for Business Leaders

Data Tables

About the Author

6 Small Business Financial Statements for Startup Financing

Financial Statements You Will Need

Putting these Statements in Order

Business Startup Budget

Startup Costs Worksheet

Profit and Loss Statement/Income Statement

Break-Even Analysis

Beginning Balance Sheet

Sources and Uses of Funds Statement

Optional: A Business Requirements Document

Include Financial Statements in Your Business Plan

Finally, Check for Mistakes!

How to Write an Income Statement for Your Business Plan

Why You Need an Income Statement

What Is In an Income Statement

Sales and Revenue

Gross Sales

Interest and Dividends

Other Income

Cost of Goods Sold

Sales, General, and Administrative Costs

Depreciation

Buzzword: EBIT

Important Plan Note

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Small Business Trends

How to Write a Business Plan

Executive Summary

Overview and Business Objectives

Company Description

Define Your Target Market

Market Analysis

SWOT Analysis

Competitive Analysis

Organization and Management Team

Products and Services Offered

Marketing and Sales Strategy

Logistics and Operations Plan

Financial Projections Plan