The interim income statement is one of the three financial statements that we always find within a business plan.
Together with this, we will always see a balance of the provisional situation and a provisional budget.
In our Excel business plan templates , you will also find other useful elements to analyze the finances of your future company: financing plan, detail of intermediary management balances, analysis of the break-even point, detail of calculation of the working capital requirement, graphs and financial ratios.
There are many different ways to present an interim income statement. However, certain rules must be respected. The presentation varies frequently depending on the level of detail but the order of the results is always the same.
For example, net income or net income should always be the bottom line of an interim income statement.
It is an important financial tool. It allows to know if a company is going to make profits in a given period. It also allows you to assess each item of expenses based on your income.
The interim income statement can influence a banker's decision regarding the interest rate he will assign to your loan. It can also affect an investor's decision to contribute (or not) capital to your business project.
That's why it's important that you understand each line on your interim income statement. It is a financial table that can be intimidating if one does not know anything about finance.
Fortunately, only one hour of analysis is enough to familiarize yourself with this table.
In this article, we explain the interim income statement line by line. In addition, we provide you with an example so that you do not get confused when handling this financial table, which is, we repeat, essential for your business plan.
THE ELEMENTS OF EXPLOITATION
THE BILLING
The billing, or anticipated business volume, corresponds to all the sales that you are going to make during the years contemplated in your financial plan.
Depending on the type of company, it may correspond to the sale of products (transformed or not) or the sale of services.
OPERATING EXPENSES
Operating expenses correspond to all expenses associated with the operation of your company.
It includes variable expenses, which you will spend based on your income, all external expenses, gross salaries, employer social security contributions and finally amortization allowances. We tell you more below.
VARIABLE EXPENSES
They are all expenses that increase proportionally to your income.
This corresponds to the purchase of merchandise, purchase of raw materials or also costs that are generated in each sale such as production costs, shipping costs and payment costs (for example, in the case of an online store, in which a company like Stripe or Paypal charges a percentage for each transaction).
EXTERNAL EXPENSES (CHARGES)
It is one of the most important items in the provisional income statement.
In external expenses, we find expenses for office supplies, equipment, materials, everything related to the rental or purchase of real estate, works and conditioning, bank expenses, fees deposited, insurance, water, electricity, telephone, marketing and advertising budget, travel expenses, etc.
GROSS WAGES
Be careful with this element, you can make an error that we frequently find in the provisional income statement: you must include the gross salary, which is the sum of the net salary plus the social charges associated with the contributions of each employee.
The net salary will appear in the provisional budget.
EMPLOYER SOCIAL CONTRIBUTIONS
Employer social contributions are what you pay in addition to gross salary.
An employee's burden is equal to his gross salary, increased by these contributions.
THE ALLOWANCES (PAYMENTS) FOR AMORTIZATION
As a general rule, in accounting, it is said that all investments that exceed the limit of $10,000 MXN must be subject to amortization.
It is quite a difficult notion to grasp for those who have never done accounting or finance.
To explain it simply, it must be understood that an investment is not an expense like the others.
Effectively, an investment represents an item that the company will use in the long term.
For example, when you pay your electricity bill, it is a one-time expense. When you buy a vehicle for your company, you will use it for several years and it will serve to generate an economic activity. However, during use, this vehicle will lose value and will one day need to be replaced.
We must record this loss of value in the income statement: it is the allowances for amortization.
OPERATING PROFIT OR OPERATING RESULT
Operating profit simply corresponds to the difference between operating income and operating expenses.
In an interim income statement, we talk about "income" and "expenses." In a provisional budget, one speaks of "cash inflows" and "cash outflows." In a balance of the provisional situation, one speaks of "active" and "liability".
FINANCIAL ELEMENTS
THE FINANCIAL PROFIT OR FINANCIAL RESULT
Financial profit corresponds to the difference between financial income and financial expenses.
FINANCIAL INCOME
Generally, an interim income statement does not include financial income.
Financial income corresponds to the amount that your company can receive but that is not of an operational nature. They are, for example, dividends on shares. This concerns companies that are already of considerable size.
FINANCIAL EXPENSES
It is the interest that you are going to pay for a bank loan.
Be careful, financial expenses do not include reimbursements of capital (which must appear in the provisional budget and in the balance sheet of the provisional situation).
EXTRAORDINARY UTILITY OR EXTRAORDINARY RESULT
Generally, there is no mention of extraordinary income or expenses in a financial plan.
Because? simply due to its definition: they are unforeseen income and expenses (an accident, a lawsuit, non-paying customers, etc.) ... so they are, by definition, unforeseeable. Therefore, they should not be included in a financial plan.
THE CURRENT RESULT
THE RESULT BEFORE TAXES
The profit before taxes is the sum of the 3 profits or results mentioned above, that is, the operating profit, the financial profit and the extraordinary profit.
Very often, on an interim income statement, profit before taxes is very similar to operating profit. This is explained by the fact that there is no financial income or extraordinary income or expenses.
Regarding financial expenses, they are frequently low in relation to the amounts generated by operations.
TAXES
They are all the taxes and tributes that you must pay during the accounting year.
Obviously, VAT (which is never part of a provisional income statement) and social contributions must be excluded from this sum. However, taxes such as those corresponding to business real estate must be included in this section.
NET PROFIT OR NET RESULT
Net income is the bottom line of your interim income statement: it is your income before taxes minus taxes and duties.
In principle, employee participation (profit sharing) can also be deducted from you, but this is rarely part of a financial plan.
SUCCEED WITH YOUR INTERIM INCOME STATEMENT WITH OUR FINANCIAL PLANS!
Each model is adapted for a specific sector.
We have Excel financial plan models for restaurants, cafeterias or even start-ups.
In each case, you will have a model that will be adapted to the corresponding sector. For example, in the case of a financial plan for a coffee shop, you will have the list of expenses that a coffee shop typically has.
No need to do calculations or modify formulas, just fill cells.
We hope that you now have a better understanding of what an interim income statement includes. This is not why you should build one from a blank sheet of paper.
In our financial plan models, the interim income statement is already prepared and formatted: just enter the assumptions for the calculations to be carried out and the lines to be filled in automatically! Pretty handy right?
There is a tab to verify that your financial plan has been done correctly.
We are aware that our clients do not know how to perfectly interpret each financial table.
That's why we've put together a tab with simple, easy-to-understand language that tells you if your assumptions are correct.
For example, this tab will tell you if the amount you want to request from your bank or investor is too low or too high (for this, it will tell you if the cash balance is always positive).
In our financial plans, all other tables are included.
Along with the provisional income statement, you will also find a provisional balance sheet, a provisional budget, a financing plan, a detail of the intermediary management balances, a detail of the calculation of the working capital requirement, as well as an analysis of the point of balance.
There are financial charts and ratios. Financial charts and ratios that are automatically calculated when you enter assumptions. This allows you to have a simple and concise view to understand your financial plan.
For sure, our team is here to assist you. We understand that, even with the explanation in this article and those included in our sample financial plans, you may have questions that have not been answered. Do not hesitate to contact us through the platform chat.
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