Pro forma financial statements are reports that look ahead instead of behind. Unlike traditional statements that show what has happened, pro formas are based on assumptions and projections that show what will happen.
Businesses in Singapore use them to plan for growth, secure funding, or test different scenarios. In this article, we'll talk about what pro forma statements are, why they're important, how to prepare one, and how products like QuickBooks can help with the process.
Pro forma financial statements are the key to making better decisions. Imagine opening a second shop. What will it cost, and how much will it earn? Pro forma reports help you map that out. They also help you get loans or investments, as banks and investors want to see your goals and how you plan to grow.
Pro forma is also great for budgeting and forecasting, helping you plan your spending across the year and avoid surprises. You can model different scenarios, from best case to worst case, so you can understand the risks and be prepared.
Using QuickBooks’ budgeting tools, you can create different versions of your financial statements based on different assumptions. This will help you see more clearly how your choices today may impact tomorrow.
There are three main types of pro forma financial statements, income statement, balance sheet, and cash flow statement. Each plays a specific role in helping businesses project financial outcomes before they happen. While traditional statements look at what has already occurred, pro forma reports are forward-looking, helping you plan for the future based on assumptions and strategy.
These tools are especially useful when planning expansions, seeking financing, launching new products, or adjusting your pricing or cost structure. By modelling different scenarios, like a sales spike or rent increase, you can test their impact on profitability, liquidity, and long-term stability.
Using all three statements together gives a full view, The income statement projects profit, the balance sheet tracks what you’ll own or owe, and the cash flow statement ensures you won’t run short of money. Each one feeds into the others.
QuickBooks makes this process easier by letting you pull real historical data into forecasts, helping you create accurate and consistent pro forma statements. Whether you’re a small retail shop or a growing startup in Singapore, these reports can turn vague plans into concrete numbers and help you make smarter, more confident decisions.
A pro forma income statement forecasts your business’ future profit by projecting revenue, expenses, and net income. It follows the same format as a standard P&L, with revenue at the top, followed by cost of goods sold (COGS), gross profit, operating expenses, and net profit. The difference is that a pro forma income statement is based on assumptions.
For example, if you plan to increase product prices by 10% and hire a new staff member, the pro forma income statement helps you see the effect on profit. It’s ideal for testing strategies and setting targets. In QuickBooks, you can use past income statements to model future ones easily.
A pro forma balance sheet gives a snapshot of your business’ projected financial position at a specific future date. It estimates your assets, liabilities, and owner’s equity after planned changes, like buying equipment, taking a loan, or growing your inventory.
For instance, if you expect to invest in a new delivery van and secure bank financing, this statement helps you to visualize how those transactions will affect your business’ value and leverage. It’s useful for tracking whether your growth plans are financially sustainable. When paired with software like QuickBooks, you can pull in existing figures and adjust for future scenarios with ease.
A pro forma cash flow statement shows how cash is expected to move in and out of your business over time. Unlike the income statement, it focuses purely on timing, like when you get paid and when bills are due.
This is especially useful for spotting potential cash shortages. For example, even if you’re profitable on paper, a delay in customer payments might leave you unable to cover monthly rent. With a cash flow forecast, you can prepare in advance. QuickBooks allows you to build cash flow projections directly from your sales and expense history, helping you manage liquidity and avoid surprises.
Creating pro forma financial statements might sound technical, but it’s really just structured forecasting. Think of it like planning a road trip—you’re mapping out where the business is headed financially, not where it’s been. Here’s how to break it down:
Step 1: Define your assumptions
Start by estimating future revenue, expenses, cost increases, loans, or planned investments. Use historical financial data from QuickBooks to make realistic, data-backed assumptions. For example, if sales grew 5% last year, projecting 6-7% this year may be a fair estimate, unless you’re launching something big.
Step 2: Build a pro forma income statement
Forecast how much you’ll earn (revenue), subtract your cost of goods sold (COGS) to get gross profit, then deduct operating expenses like rent and salaries. This gives you your net income.
Step 3: Build a pro forma balance sheet
List your projected assets (inventory, equipment, cash), liabilities (bank loans), and equity. Buying new inventory adds to your assets, while borrowing money adds to your liabilities.
Step 4: Build a pro forma cash flow statement
Cash flow is about timing. Estimate when money comes in from customers and when it goes out to pay suppliers, rent, or salaries. This helps you avoid running short, even if you’re profitable on paper.
Step 5: Review and refine
Check that all three statements align. For example, if you add a loan to your balance sheet, it should also appear in your cash flow.
QuickBooks can help with built-in templates and tools that simplify each step.
Let's get into a pro forma income statement example.
Bob owns a home décor shop in Singapore. He wants to forecast next year’s finances before hiring a new employee and adding products.
Assumptions:
Bob’s pro forma income statement:
With this forecast, Bob sees he can cover the cost of an extra staff member and marketing. If he wants to boost profit, he can tweak prices or delay hiring. He pairs this with a pro forma cash flow statement to confirm he’ll have enough money each month to pay bills. This full-picture planning lets him act with confidence.
Pro forma statements help you:
Say you run a popular neighbourhood bakery. Business is booming, and you're eyeing a second location. But before you sign a lease or hire new staff, a pro forma report can help you assess extra costs, forecast potential profit, and figure out how much cash you’ll need to stay safe.
Instead of just hoping it works out, you can see the numbers and plan accordingly.
With tools like QuickBooks, you don’t have to build these forecasts from scratch. Just pull in your past data, tweak your assumptions, and let the software do the heavy lifting.
Pro forma statements are powerful, but only if used correctly. Here are common mistakes and how to avoid them:
Imagine you’re planning a big marketing push. Your income projection shows great returns, so you give the green light, but your pro forma cash flow statement tells a different story. Payments from customers won’t arrive until weeks after your ad spend is due, without catching that, you could be short on funds.
Keep your pro forma reports realistic, clearly labelled, and regularly updated. That way, they guide your decisions rather than mislead you.
The difference comes down to purpose and timing:
For example, your traditional statement might show a net profit of S$30,000 last year. But your pro forma statement could forecast S$50,000 if your expansion plan succeeds. This projected version helps you evaluate risk and opportunity.
Traditional reports are submitted to IRAS, while pro forma statements are used internally, unless shared with investors. It’s important to use both, one for compliance, the other for strategic insight.
Startups in Singapore rely heavily on pro forma statements. Without much historical data, projections are often the only way to show viability. Here’s why they matter:
Let’s say you’re launching a tech startup. You forecast S$10,000 in monthly revenue, starting in month three. Expenses include salaries, software, and marketing. Your pro forma shows a loss in the first six months, with breakeven by month nine. This visibility helps you plan cash needs or funding rounds.
QuickBooks lets you adjust these forecasts quickly as your startup evolves, which is crucial during the fast-paced early stages.
QuickBooks makes pro forma creation faster and easier. You don’t have to start from scratch:
Instead of manually crunching numbers or juggling spreadsheets, QuickBooks helps you pull accurate, reliable data straight from your books, allowing you to move faster and with more confidence.
Pro forma financial statements give Singaporean businesses a chance to test ideas before making real-world commitments. Whether you’re expanding, hiring, or launching something new, forecasting with pro formas keeps your decisions smart and strategic.
QuickBooks Singapore gives you the tools to make these projections accurate and simple.
