Report name: Sample Forecast
How the Profit and Loss Forecast is Calculated
Gross profit minus overheads and expenses describes pre-tax profit. There is a lot more than that to a successful profit and loss forecast though.
Gross profit minus overheads and expenses describes pre-tax profit. There is a lot more than that to a successful profit and loss forecast though.
| forecast for year beginning the 1st. | May 2017 | May 2018 | May 2019 |
| Sales | 1,500,000 | 1,650,000 | 2,200,000 |
| add: Delivery / Service Charges | 37,500 | 41,250 | 55,000 |
| Total Sales | 1,537,500 | 1,691,250 | 2,255,000 |
| less: Cost of Goods Sold | 885,000 | 973,500 | 1,298,000 |
| Gross Profit Cfwd | 652,500 | 717,750 | 957,000 |
| Wages NI and Pensions | 300,000 | 310,000 | 330,000 |
| Administrative Overheads | 105,800 | 127,200 | 145,500 |
| Selling Overheads | 136,381 | 156,500 | 203,567 |
| Depreciation | 10,876 | 17,543 | 20,290 |
| Operating Overheads and Expenses | 553,057 | 611,243 | 699,357 |
Operating Profit | 99,443 | 106,507 | 257,643 |
| less: Interest Charges | 5,062 | 7,469 | 5,394 |
| add: Exceptional Item (Profit on Asset Sales) | 0 | 0 | 0 |
Pre-Tax Profit for the Year | 94,381 | 99,038 | 252,249 |
| less: Corporation Tax | 13,613 | 18,495 | 47,077 |
| Net Profit Cfwd | 80,768 | 80,543 | 205,172 |
| Corporation Tax % of Pre Tax Profit | 14.4% | 18.7% | 18.7% |
Also known as EBIT (earnings before interest and tax) operating profit is concerned with profits arising from core trading activity, nothing else.
Operating profit also measures the predicted performance of your business plan. Your operating profit forecast is also a major component of net operating revenue, which forms part of the operating cash flow forecast.
Profits (or losses) from the sale of fixed assets or income from investments are "exceptional items" i.e. not connected with core trading activity.
These are excluded from operating profit and are only added to the profit and loss or net income forecast .after the operating profit forecast has been calculated.
This example of a profit and loss forecast is calculated simply from your own projected figures for sales, margin, overheads, cost and sales, values of assets bought and sold, financing plus a few simple ratios.
Creating forecasts using Figurewiard can be for one, two or three years.
UK VAT and Corporation tax charges are all automatically calculated and applied to forecasts .for you by our system.
In this example, forecast overheads include fixed overheads of £130,000 and wages of £300,000, a total of £430,000. Reducing these using our 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 |
In this example the What-If Calculator is again used, this time reducing variable overheads.
These are calculated as .percentages of sales to forecast the cost of shipping customer orders and for the provision of bad debts. They are jointly reduced by 0.5% (i.e. 0.25% each).
| 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 |
HMRC does not accept depreciation as tax deductible. That is therefore added back to the pre-tax profit forecast and replaced by capital allowances.
Figurewizard calculates and applies all capital allowances simply from your own forecast figures for fixed asset purchases and disposals with no input called for from yourself.
Provisons for bad debts, which like depreciation do not involve cash transfers and non-deductible charges such as entertainment expenses are also added back to taxable profit.
Fees other than interest that are associated with financing activity, such as bank, charge card or invoice financing service charges are chargeable to operating profit.
Interest charges on the other hand are exclusively concerned with financing activity (the cost of money) and are therefore only charged after the operating profit forecast has been calculated. They are tax deductible though.
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.