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How to forecast profit and loss
Key points in this article
- Predicting sales
- Estimating cost of goods sold
- Calculating expenses
Do you have an idea of how much money your business will bring in over the next year?
Likewise, are you aware of all the expenses you face during the coming 12 months? Use our profit and loss template to accurately forecast the year ahead.
Income
A profit and loss forecast is used to predict profit and losses over the coming financial year.
Begin by focusing on next month:
- Enter your predicted sales for the upcoming month
- Add any sales returns you usually have
- Add any discounts you usually give
Continue inputting any additional income streams you may have. The template will automatically make the calculations for you, so enter each amount as a positive number.
The first part of forecasting profit and loss involves predicting sales
Cost of goods sold
Next, enter your stock level at the start of the month and add stock purchases plus other costs associated with your goods. Input your predicted stock level for the end of the month. The template will calculate the total cost of goods sold and your gross profit for the month.
Secondly, add your beginning stock levels and estimated end stock levels
Expenses
The bottom half of the template deals with expenses - your selling, administrative and finance expenses. Navigate down the list, entering all relevant expenses, which will be calculated by the template.
Input any interest expenses and hire purchase charges to calculate your profit before tax. Lastly, enter the estimated tax you’ll pay for the month and your net profit will be calculated at the bottom. Move on to the next month and repeat the above steps. Continue estimating your sales and expenses for the next six or 12 months. The last column will total all your monthly sales, expenses, interest and tax data into a half-year or annual amount.
Lastly, calculate your likely expenses over the appropriate period of time
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