Pro forma Financial StatementsCheck out "pro forma financial statements" in Wikipedia, and you will find five different definitions for the term. Interestingly, the “accounting” definition they provide is NOT the definition we are interested in here. Wikipedia’s “accounting” definition deals with the arcane calculation of profits and losses used to circumvent Generally Accepted Accounting Principles (GAAP), and has nothing to do with pro forma financial statements as we will use them. As small business owners, we are only interested in the “business” definition of pro forma financial statements, which is simply: the anticipated financial statements resulting from future business transactions. They are basically a set of forecasts, or even budgets, of what you think your financial statements will look like at a specified point in the future. 
Format Pro forma financial statements look exactly like your regular, or actual, financial statements (or what your actual statements will look like if you are just starting up). The only difference is that pro forma statements use your best estimate of future financial performance numbers instead of actual numbers from your bookkeeping system. You will have at least three of the four elements of financial statements in your pro forma statements:
When you start building your dream plan, you will want to know how economically feasible your business idea is, so you will begin developing a set of pro formas—no matter how crude. You will begin with what you think your sales might be, and what your costs might be. You can periodically modify these numbers as your business planning moves forward. You will continually learn more about your market as you do more research, and this can have an impact on your sales estimates. You will also determine more costs as you proceed, and you will want to update your forecasted expenses accordingly. That means you can use your pro forma statements as a "running record" of building your business on paper. Your pro formas will need to be formally formatted for your formal business plan…if or when you need it. This would be for presentations to your investor(s), or bank, etc. They will want to see what you believe your business is capable of doing in future months and years. When presenting your pro formas in your business plan, it also helps if you have some good actual historical data to build comparisons from. To continue with further information on financial statements, go to the Cash Flow Analysis report. Return to Top of Page Proceed to Cash Flow Analysis Return from "Pro forma Financial Statements" to Small Business Accounting to view the "List of Reports For This Section" Return to Home Page
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