What’s a pro forma template? Free pro forma templates for Excel

pro forma example

Pro forma statements are useful with regard to tracking future financial direction and occurrences, often including some historical numbers to help account for what the projected outcomes should look like. In the event that the projected numbers show that profits are likely to drop, the pro forma statement allows a company to see the need for changes in its operations to prevent decreased profitability. The changes can include cutting costs or increasing the price https://www.bookstime.com/articles/pro-forma-financial-statements of goods and services. Finally, with the pro forma income statement and balance sheet complete, we can now knock out the cash flow statement. We’re going to take you through the steps necessary to create a basic full-year pro forma projection using an income statement, cash flow statement, and balance sheet. However, we’re lobbing another caveat your way – take our walk-throughs with a grain of salt since they’re only a glimpse into the basic pro forma process.

It is usually prepared by management and is used to help in the analysis of certain economic conditions, business decisions, deals, mergers or acquisitions, and other events. Estimating a balance sheet is a useful tool for the investors, management and creditors to analyze how the financial position of a company is impacted. This can prompt a warning signal for the stakeholders about the vulnerability of the company’s position if a worst-case scenario occurs for a company.


An investor is any individual or entity that has a financial stake in a business, with the expectation of a financial return. Likewise, businesses use this information to paint a picture of future success to persuade potential investors and/or to maintain the confidence in their current investors. The phrase pro forma refers to the practice of estimating the progress of operations of a business. Pro forma financial statements are documents that are prepared to try to predict future success of a business. They do not follow generally accepted accounting principles, or GAAP, which are general reporting requirements that all U.S. business must follow. Pro forma documents do not detail how a business is actually performing, but rather how a business will possibly perform.

pro forma example

Pro forma projections are all about looking ahead to try and predict where finances are headed and how hypothetical scenarios could affect the bottom line. Fortunately, there are Excel templates that can help you achieve that — or even smarter solutions (more on this later). Pro-forma earnings represent the assumptions used at arriving at the figures. Few assumptions also reflect the mentality of the management in arriving at the figures.


Accountants prepare financial statements in the pro forma method ahead of a proposed transaction such as an acquisition, merger, a change in a company’s capital structure, or new capital investment. 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). Experts from Financially Simple recommend the following steps to create proforma financial statements that will impress investors. A multi-period proforma like this is used to estimate cash flows over the entire holding period and gives a more complete perspective on future investment performance.

  • Estimating a balance sheet is a useful tool for the investors, management and creditors to analyze how the financial position of a company is impacted.
  • By inputting these variables, you can calculate your profit and loss under the template’s author’s guidelines.
  • The Budget Tracking Template is another way to get a clear picture of the organization’s spending and forecast how those expenses will impact the bottom line.
  • It’s a tool that business owners, decision-makers, stakeholders, investors, creditors, and others use to examine hypothetical conditions.
  • The Securities and Exchange Commission (SEC), the United States’ regulator of its stock market, requires pro forma statements with any filing, registration, or proxy statement.

Doing so can allow you to conduct a side-by-side comparison of possible outcomes to determine which is favorable and guide your planning process. Whether you’re trying to interpret pro forma financial statements or prepare them, these projections can be useful in guiding important business decisions. In fact, business owners, investors, creditors, and other key decision-makers all use pro forma financial statements to measure the potential impact of business decisions. This projection looks backward (at one or more years) at another company’s financial statements.

How Do You Create a Pro Forma Income Statement

Create projections around operating expenses and net sales, effectively manage resources, assign tasks to team members, and communicate with multiple teams in real-time. Pro forma statements demonstrate to investors and lenders that a company is worth investing in. In addition, it’s easier to prove sustainability by presenting well-researched pro forma statements to a would-be stakeholder.

  • It would consider items like a company’s current and future operations, financial documents, net profit, projected cash flow, and overall financial health.
  • With pro forma statements, businesses can better make assumptions on what decisions are best for the company, such as labor increases, production increases, or even expansion.
  • A balance sheet is a financial statement that portrays a company’s financial position.
  • The Net Operating Income, often abbreviated as NOI, is one of the most widely used metrics for a property.
  • However, you will not own the software that stores the templates, which means you need to download updates every time.

You could deliver to them two sets of pro forma financial statements, and two risk assessment templates to use to discover their best option. The main advantage of pro forma financial statements is that they provide a more comprehensive view of a company’s future financial performance than traditional financial statements. They can provide management with a better understanding of how their decisions will impact the company’s future financial performance. In other words, the different types of pro forma statements are basically the same financials you’re already accustomed to, just using hypothetical data for future periods. So, as you’ll see once we discuss how to create pro formas in just a bit, they don’t require you to recreate the financial reporting wheel, at least in terms of format. Pro forma financial statements are commonly used by companies to forecast future performance and plan for potential scenarios.

Benefits of using pro forma analysis

Instead of leaving your pro forma templates to basic internet searches and best guesses, get the right document that you need the first time around. Sign up for ContractsCounsel today
with no upfront cost to you and start receiving proposals today. Working with a lawyer for a business formation is smart since you will effectively and efficiently avoid making legal mistakes, negatively impacting your company’s https://www.bookstime.com/ future. A pro forma cash statement makes it easy to see how operating activities would be affected if your cash flows were to increase (or dry up). Likewise, pro forma statements make it easier to anticipate changes that could affect the business — for example, if the tax liability went up due to entering a higher tax rate. Jack meets with a senior accountant who shows him the balance sheet first.

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