Income Projection Statement

What Is an Income Projection Statement?

Keeping your business going for the long haul requires looking ahead. How much money do you expect to make this year? What will your expenses be? The income projection or profit and loss projection statement maps out your financial future, so you know if you need to change things.

An income projection statement is an income statement for the future. It shows how much you expect in revenue over the coming year or so, and how much in expenses. If the amounts don't look good, you can start making changes to fix things.

Your regular income statement is a simple equation. A quarterly income statement adds up what you earned in those three months, subtracts your expenses, and shows whether you made a profit or a loss. The profit and loss/income projection statement does the same thing for your future, the Small Business Administration (SBA) explains.

The income or profit projection statement looks at how much money you expect to bring in over, say, the next six months. Then it looks at expenses. Subtract expenses from income, and you get the amount of profit left. If you expect to take out a loan or receive investment capital, factor those in.

For a profit forecast example, suppose you're considering a new product launch. Based on your market research, you estimate sales income of ​$220,000​ over the first six months. The projected expenses of manufacturing the new product, including paying for added work hours, run ​$180,000​. The loans you take out to buy the new equipment trigger ​$20,000​ in interest payments. At the end of six months, you end up with ​$20,000​ in profit.

It's up to you to decide what that profit forecast example signifies. Is that enough to make the effort worthwhile? If not, can you boost sales by spending more on marketing? Can you save money by trimming the cost of manufacturing? The profit projection statement helps you see whether your plans are on track or need a course correction.

Forecasts and Budgets

Bench points out making a profit projection is not the same as drawing up a budget. Your income projection statement looks at what you expect to happen. You can then use that information to figure out your budget. If a profit forecast example shows a ​$20,000​ profit, you could spend the extra on upgrading equipment or bonuses for staff or reserve it as emergency funds.

If the profit projection statement shows a loss, then you have some tough budget work to do. Is it a temporary revenue loss you can ride out by borrowing some money? If not, you have to adapt by cutting staff or dropping plans to open a new store, for example. You can plug figures into a standardized profit forecast template, but the decision-making depends on your individual situation and goals.

How you make your profit projection depends partly on how much history you've accumulated. If your business has been in operation for a few years, you can use past income statements as the basis for your income projection statement. If you're a new startup, you have to rely on research to figure out what's ahead.

If you plan to show the statement to investors or lenders, stay as accurate and honest as possible. If you have to make speculative assumptions about profits or expenses, include an explanation for how you worked it out. An income forecast statement can help bring in money, but only if it's believable and persuasive.