The Importance of Profit and Loss Projection Template
Complementary guide for Profit and Loss Projection Template.
The monthly and quarterly profit and loss projection is planning tool to help the business to predict sales and cost for the whole year. Monthly sales and expenses are keyed in monthly basis; the projection should be based on available data and information. The manager is required to research on cost associated in running business and should try to come up with possible accuracy sales projection and cost by incorporating business and economic environment factors. The quarterly projection is automatically updated by data keyed in monthly projection to shows the business projected performance on quarterly basis.
Profit and loss income projection can serve the goal of planning for new business or for an ultimate goal of controlling operations. As business expenses and sales become known month after month, the difference between the actual and budgeted has to be recorded and the owners or managers have to investigate the differences. The investigated differences are used as enlightenment to the business owners and managers on daily operations of business and help them implement strategies to accomplish their visions.
By knowing projected income, an entrepreneur or a business can analysis the viability of the project. The projection helps the business to make arrangement for loans to support operations as the business grows market share. A business can operate at a loss for the first few months or even up to a year while building up the market share by working a profit and loss projection to show the time line estimated to turn business into profitable operations. The projected timeline will allow a business owner to present a loan payment plan which does not put strain on working capital of the business. While a projection cannot be precise to 100% truth of business because of unpredictability of the business, a well researched prepared plan can prepare business to gear up efforts and implement strategies to achieve it goals.
Guessing is not an option when making projection plans. The projections have to be supported by available information, data, business experience, industry performance, competitors, economic outlook, professional input etc. This will allow credibility in the projection and boost the confidence to the business owners and lenders who require the plan before they extend the loan.
Keep research notes when making plans and do not hesitate to make changes on plan as more information becomes available to call for adjustment on plan to reflect a clear picture of the business. The goal is to get it right and not to create a picture which cannot be a reality to the truth of facts.