Managing finances is important to the success of your business. An essential tool to keep track of and manage your finances is a performa. Which essentially is a statement that estimates your potential income and expenses for a specific period. This allows you to plan for the future and make important decisions. In this post, we will walk you through how to create a performa so you can focus on growing your business.
Define Your Objectives
To start, you’ll need to set clear objectives. For example, what is it that you want to achieve? Or what are your goals? These will form the basis of your performa. Objectives could be to increase sales, improve margins, or reduce costs. Remember to be realistic and to set attainable targets for yourself with a timeline for achieving them.
Estimate Your Sales
A sales forecast is an estimate of the revenue you expect to generate over a specific period of time. Reference historical sales data and industry trends to come to a conclusion. It’s important to be realistic and a little conservative, so you can have a clear vision of your potential revenue.
List Your Expenses
This part of your performa may be self-explanatory but be sure to include your estimated expenses. Or what you expect to incur within your selected period of time. This may include rent, inventory, marketing, and more. Again be conservative to avoid overestimating which may lead to inaccurate projections.
Calculate Your Net Income
When you’ve finished estimating your sales and expenses, now is the time to calculate your net income. To do so, simply subtract expenses from your revenue. If your net income is negative, you’ll need to adjust your performa accordingly to create a viable financial plan.
Review And Revise Your Performa
Your performa is something that should change over time. As the owner, you should revise and review it regularly to reflect changes in your business and the market. Keep track of your actual revenue and expenses and compare them to your performa. This will help you identify any discrepancies.
With this guide, you will be well on your way to creating a performa that accurately reflects your goals. It’s important to remember to be realistic when estimating your sales and expenses and to keep your performa as up-to-date as possible. With this financial tool, you’ll now be able to set your business up for success.
Written by: Erik Hibbard