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There are four main types of pro forma statements. So, when you create next year’s budget, you can include that extra $7,000-maybe spending $4,000 over the course of the year to pay down the principal on a loan, while adding $3,000 to savings. According to your pro forma annual income statement, your financial projections show it will be $44,000 next year. Your budget may be based on the financial information of your pro forma statements-after all, it makes sense to make plans based on your predictions.įor example: Your income this year is $37,000. Think of it this way: A pro forma statement is a prediction, and a budget is a plan. But budgets and pro forma statements are two distinct financial tools. And both help you plan how you’ll use your money. After all, you create both in anticipation of the future. It may be tempting to think of a pro forma statement as the same as a business budget. Big corporations who have in-house accountants use pro forma statements for financial modeling and forecasting different scenarios. Anticipate changes that may affect your business as it grows, such as entering a new tax bracket.įor these purposes, pro forma statements are typically created as a part of a financial forecast in financial accounting.Plan for the future, by considering best, worst, and most likely case scenarios in detail.Get financed, by showing lenders or investors how you would use their money to sustainably grow your business.Why create pro forma statements?Ĭreating pro forma statements for future scenarios can help you: They can help you make a business plan, create a financial forecast, and even get funding from potential investors or lenders.ĭifferent but related: you can send clients pro forma invoices to let them know how much their order would be if they placed it today. However, pro forma statements are still extremely useful. Using pro forma statements that aren’t marked as such to misrepresent your business to investors, the IRS, or financial institutions can be penalized by the Securities and Exchange Commission). Pro forma statements don’t need to meet the strictest accounting standards, but must be clearly marked as “pro forma” and can’t be used for things like filing taxes. This is because GAAP compliant reports must be based on historical information. Since pro forma statements deal with potential outcomes, they’re not considered GAAP compliant. As in, “What if my business got a $50,000 loan next year?” Your pro forma statements for that scenario would show what your income, account balances, and cash flow would look like with a $50,000 loan. Pro forma statements look like regular statements, except they’re based on what ifs, not real financial results. Our customers are welcome to contact us at 80 or if they have any questions regarding the shipping of gifts and samples.There are three major pro forma statements:
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Note some countries do not allow the use of Pro Forma Invoices and instead require a Commercial Invoice format be used. \Ĭountries that don’t accept Pro Forma invoices for customs clearance of non-document shipments are: Aruba A Pro Forma Customs Invoice Format is commonly used for gifts or samples to signal to customs officials that the nature of the goods is informal. Customs Invoice: Make sure the customs Invoice states the reason why that item is being sent to the receiving country so that customs officials know how to handle it.Description: Adding “sample,” “personal effects,” “gift,” “not for resale,” and “value for customs purposes only no commercial value” to the description can help customs know how to handle clearance and any duties or taxes properly.Value: When shipping gifts or samples, list the value of what it would cost to replace the item if something were to happen to it.How should I designate a gift or sample on customs forms? It may be a low value, but it would cost something to replace it if it got lost or damaged. It is not uncommon to think that if you are sending a gift or a sample that you should declare no value on the Invoice. See article explaining the difference between the two invoice types here. So that declaration is made with Commercial or Pro Forma Invoices. When you are shipping, though, you are not there to make that declaration. It’s an opportunity for you to declare things you are bringing into that country. You are probably familiar with the concept of going through customs when you travel internationally.