This is a Working Example of our Forecasts
Registered users can produce their own business forecasts in minutes; exactly as is shown here.

Report name: Sample Forecast

How the Profit and Loss Forecast is Calculated

This example shows how Figurewizard calculates your profit and loss forecast for 1,2 or 3 years simply from projected overheads, investments and finance.

forecast for year beginning the 1st.May 2017May 2018May 2019
add: Delivery / Service Charges37,50041,25055,000
Total Sales1,537,5001,691,2502,255,000
less: Cost of Goods Sold885,000973,5001,298,000
Gross Profit Cfwd652,500717,750957,000
Wages NI and Pensions300,000310,000330,000
Administrative Overheads105,800127,200145,500
Selling Overheads136,381156,500203,567
Operating Overheads and Expenses553,057611,243699,357

Operating Profit

less: Interest Charges5,0627,4695,394
add: Exceptional Item (Profit on Asset Sales)000

Pre-Tax Profit for the Year

less: Corporation Tax13,61318,49547,077
Net Profit Cfwd80,76880,543205,172
Corporation Tax % of Pre Tax Profit14.4%18.7%18.7%

How this Profit and Loss Forecast is Calculated

This example of a Figurewizard  profit and loss forecast is calculated from your own projected figures for sales, margin, overheads, the cost and sales values of assets, financing and a few simple ratios.

VAT and Corporation tax are automatically calculated and applied to the forecast .by our system. Forecasts can be for one, two or three years.

What is the Operating Profit Forecast

Operating profit is solely concerned with profits arising from core trading activity nothing else. making it the most important result of this profit and loss forecast. 

Operating profit is also a major component of net operating revenue, which is a key component of the operating cash flow forecast.That forecast describes how well your company expects to service external financing such as the bank overdraft and other loans going forward.

When Exceptional Profits are Included

Profits (or losses) from the sale of fixed assets or income from investments are "exceptional items" i.e. not connected with core trading activity.

As a result exceptional profits are not added to the profit and loss or net income forecast until after the operating profit forecast has been calculated.

How to Improve Forecast Net Profit, Liquidity and Cash

In this example, forecast overheads include fixed overheads of £130,000 and wages of £300,000, a total of £430,000. Reducing these using the What-If Calculator will dramatically improve both profits and cash.

Year 1 less: Fixed OH + Wages Pre - Tax Profits Working Capital (Liquidity) Operating Cash Flow Bank: Year End
0% 430,000 94,381 63,022 12,208 -35,439
5% 408,500 116,779 81,165 33,488 -13,261
10% 387,000 138,712 98,931 54,768 8,452

How to Improve Forecast Operating Profit, Liquidity and Cash

In this example the What-If calculator is again used to reduce fixed overheads are reduced but this time with reductions of 0.25% added to the % of sales for the cost of shipping orders and providing for bad debts.

Shipping and Bad Debts Fixed OH + Wages Operating Profit Working Capital (Liquidity) Operating Cash Flow Bank: Year-End
7.0% 430,000 99,443 63,022 12,208 -35,439
6.5% 408,500 128,523 87,430 40,896 -5,698
6.0% 387,000 157,603 111,326 69,584 23,410

How the Taxable Profit Forecast is Calculated

To arrive at an HMRC compliant taxable profit forecast the pre-tax profit forecast is adjusted, for example by substituting capital allowances for depreciation.

Provisions such as for bad debts and depreciation are also added back. at is because while they are legitimate charges to proft they have not involved any transfers of cash. In addition, entertainment expenses are also added back.

How all of this is calculated and applied to forecasts by Figurewizard can be viewed in the Corporation Tax sample forecast.

Corporation Tax and Entertainment Expenses

Although chargeable to profit and loss, HMRC do not generally accept entertainment expenses as being tax deductible. They are also subject to complex rules. For example:

Entertaining Business Clients – Where the entertainment is accepted as a forum for discussing business deals. Not regarded as a benefit in kind.

Any Other Entertainment – Where HMRC does not regard the entertainment charge as appropriate for business dealings a personal and taxable benefit in kind can be created.

Auditors have a duty to report these factors when assessing the company's taxable profit.

Financial Fees and Interest Charged to Profit

Fees associated with financing such as bank, charge card or invoice financing service charges are chargeable to operating profit: Interest charges are not.

Interest charges are a tax-deductible charge to both forecast net profit and forecast taxable profit but because they are solely concerned with financing, they are not charged to profit until after operating profit has been calculated.

Forecast Profit after Tax and Equity

Retained profits after tax are those available for distribution as dividends. They are variously referred to in the balance sheet as reserves or shareholders funds and form part of the equity or net worth of the company.

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