Simple Income Statement Template (In Excel)

When creating your business plan, you’ll need to include a comprehensive income statement. An income statement, also commonly referred to as a profit and loss statement, is essentially a snapshot of your business’s profitability or the profits generated from operations over a certain period of time. It contains the company’s revenues, total operating expenses, and net income over a specific time period. 

This information is important to potential lenders or investors, as it will show them how the company is performing. It can also help identify areas of improvement and track income and expenses over time. So if you’re in the midst of creating your business plan, you need to include an income statement to show investors and other shareholders the state of your finances.  

 

What is a Pro Forma Income Statement?

A pro forma income statement is an advance income statement projection that is used to estimate a company’s financial performance in the future. It is prepared before the actual income statement is finalized and takes into account changes in market conditions, as well as any planned investments or expenses. The pro forma statement contains estimated figures that are not yet finalized, allowing businesses to plan ahead and make more informed decisions when it comes to their finances.

The pro forma statement typically includes projected sales revenues and expenses, such as costs of goods sold, operating expenses, and interest expenses. The goal of a pro forma income statement is to provide companies with an idea of how their business will perform financially in the future so they can adjust their budget according to the estimated outcomes. A pro forma can also be used to compare different scenarios and forecast potential challenges or opportunities for a business moving forward.

In addition, a pro forma statement can be used by investors as a tool for analyzing a company’s performance over time, as well as its ability to meet short-term goals or take on new projects. This allows investors to gain insights that are not easily visible when solely focusing on historical data points or industry averages. By taking into account current trends and accurate assumptions about the future, a pro forma provides valuable information that can help investors make better investment decisions.

 

Why You Need an Income Statement For Your Business

There are several reasons why your business needs an income statement:

• Helps you get funding: First and foremost, an income statement is essential for obtaining financing from potential investors. Without an income statement in your business plan, it is almost impossible to receive funding for your business, as investors will want to know exactly how much money your business has earned or lost in order to make an investment decision. By having a clear and up-to-date profit and loss statement in your business plan, you can provide potential investors with the vital information they will need in order to make an informed decision.
• Helps monitor financial performance: An income statement provides owners and investors with important insights into a business’s financial performance over a given period of time. This allows the owner to track revenue and expenses, as well as any gross profit or loss that may have been incurred throughout the year. These insights can then be used to make better business decisions in the future, such as hiring additional staff or investing in new equipment.
• Improves decision-making: By having an income statement in place, a business is able to make more informed decisions on how to best allocate its resources. This can be especially helpful when attempting to determine the impact that certain expenses may have on a company’s bottom line. With the help of an income statement, businesses can better understand which investments or expenditures are necessary for the long-term health of the organization.
• Completes your business plan: You need a business plan for several reasons, including raising capital, obtaining a loan, or even just formalizing your business concept. An income statement is an essential component of any business plan, as it provides investors, lenders, and other shareholders with the necessary information to make an informed decision about your business.

 

 

Components of a Simple Small Business Income Statement

When working on your income statement, there are several essential components that you need to include to get an accurate picture of your financials. These components include: 

Revenue

Revenue is the amount of money your business earns from its sales. This includes all income generated through the sale of products and services, as well as any other fees your company may collect.

Expenses

Expenses are all costs associated with running a business. These business expenses include things like labor costs, materials, rent or utilities, marketing expenses, insurance costs, taxes and any other operating expenses specific to your type of business.

Cost of Goods Sold (COGS)

Cost of goods sold (COGS) refers to the amount of money spent on producing the goods or services that your company sells. This includes all direct expenses associated with the production and delivery of products and services, such as the cost of raw materials, labor costs, and shipping and handling fees.

Non-Operating Income And Expenses

Non-operating income and expenses refer to sources of income or costs that are not directly related to the core operations of your business. This could include things like interest income, dividends, or gains from investments. It could also include any non-operational expenses such as legal fees or accounting services.

Gains And Losses

Gains and losses refer to amounts earned or spent outside of the core operations of your business. This could include any gains or losses due to currency exchange rates, investments, or other activities not related to the day-to-day running of your business.

Net Income

The net income is calculated by subtracting total expenses from total revenues. This number will tell you whether or not your business has earned a net profit or incurred a loss in the given period of time. It’s important to note that in some cases, there may be additional expenses, such as depreciation charges, that should be taken into account when calculating net income.

 

Get our free income statement template download to help you create your own.

Download our Sample Income Statement

 

How To Create a Basic Income Statement For Small Businesses

Now that you know what you need to include in your income statement, you’re ready to create one. Creating an income statement for your small business is quite simple. All you need is a simple spreadsheet, like Microsoft Excel, to get started. Below are the steps you should take to create your income statement:

1. Choose Your Period:  First, you have to decide on the time frame for your income statement. This could be monthly, quarterly, or annually.
2. Gather Your Data: The next step is to collect all of your data for the given period. This includes sales and revenue figures, as well as costs associated with running your business, such as expenses, COGS, and non-operating income and expenses.
3. Arrange Your Spreadsheet: Before inputting your data, you need to organize your income statement so that it’s easy to read and understand. That means creating separate categories, such as revenue, expenses, gains and losses, etc. and putting them in separate columns or rows. 
4. Input Formulas:  Once you have your spreadsheet organized, you need to input formulas to calculate total revenue, total expenses, net income, and other components of your statement.  It’s easiest to do this before inputting all your data.
5. Input Your Data: Once you have everything organized into categories, it’s time to enter your data into the spreadsheet. It’s best to start with one category at a time. For example, first, input all your revenue data, then move on to expenses, etc.
6. Calculate Your Net Income: Once all of your data is entered in, you can calculate your net income by subtracting total expenses from total revenue. This will give you an accurate picture of how your business has performed over the given period of time.
7. Save & Review:  Once you’ve calculated your net income, save the spreadsheet and review it to ensure that all of your numbers are accurate. You’ll want to save this as your own income statement template so you can use it again in the future. It is recommended that you update your income statement at least once a year.

 

Other Financial Statements

The income statement is not the only financial statement that is important for your small business. Other financial statements, such as a balance sheet and cash flow statement, are also essential to understanding the company’s financial health.

The balance sheet is a snapshot of the financial position of your business at a given point in time, showing assets, liabilities, and capital. It’s a useful tool for understanding the overall financial situation of your business. It’s very similar to the income statement, but the difference is that the balance sheet shows a static point in time, whereas the income statement shows the financials over a period of time.

The cash flow statement is another important financial document that tracks the flow of money into and out of your business. It shows how much cash has been generated, as well as how much is being spent. This document can be used to understand the financial health of your business and make sound decisions about investing and other financial activities. However, unlike the income statement or balance sheet, it does not track any non-cash transactions such as depreciation, investment gains, or other activities not related to the day-to-day running of your business.

 

 

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