1. Money

Writing the Business Plan: Section 8

Part 2: The Income Statement

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Business Plan

Business Plan

Image (c) Susan Ward

The Income Statement is one of the three financial statements that you need to include in the Financial Plan section of the business plan.

The Income Statement shows your Revenues, Expenses, and Profit for a particular period. It's a snapshot of your business that shows whether or not your business is profitable at that point in time; Revenue - Expenses = Profit/Loss.

While established businesses normally produce an Income Statement each fiscal quarter, or even once each fiscal year, for the purposes of the business plan, an Income Statement should be generated more frequently - monthly for the first year.

Here's an Income Statement template for a service-based business. It's followed by an explanation of how to adapt this Income Statement template to a product-based business.

 

YOUR COMPANY NAME

Income Statement for the year ending _____________

Month  Jan  Feb   Mar   Apr   May   Jun   Jul   Aug   Sep   Oct   Nov   Dec   Total 
                           
REVENUE                          
                           
REVENUE: Services                          
Service 1                          
                           
Service 2                          
Service 2                          
TOTAL REVENUE: Services                          
                           
                           
                           
REVENUE: Miscellaneous                          
Bank Interest                          
TOTAL REVENUE: MISCELLANEOUS                          
                           
TOTAL REVENUE                          
                           
EXPENSES                          
                           
DIRECT COSTS                          
Materials                          
Equipment Rentals                          
Salary (Owner)                          
Wages                          
CPP Expense                          
WCB Expense                          
TOTAL DIRECT COSTS                          
                           
GENERAL AND ADMINISTRATION                          
Accounting and Legal Fees                          
Advertising and Promotion                          
Bad Debts                          
Bank Charges                          
Depreciation and Amortization                          
Insurance                          
Interest                          
Office Rent                          
Telephone                          
Utilities                          
Credit Card Commissions                          
Credit Card Charges                          
TOTAL GENERAL AND ADMINISTRATION                          
                           
TOTAL EXPENSES                          
                           
                           
NET INCOME BEFORE INCOME TAXES                          
                           
INCOME TAXES                          
                           
NET INCOME                          

 

Not all of the categories in this Income Statement will apply to your business. Leave out those that don't apply and add categories where necessary to adapt this template to your business.

To use this template as part of the business plan, you'll need to set it up as a table and fill in the appropriate figures for each month (as indicated by the line "row listing each month"). There are links to two excellent examples of Income Statements provided by the Royal Bank in the sidebar of this article.

If you have a product-based business, the Revenue section of the Income Statement will look different. Revenue will be called Sales, and inventory needs to be accounted for. For instance, if you look at the Royal Bank's example of an Income Statement for Kamiko's Fine Foods, you'll see the Revenue section of the Income Statement described as:

SALES

COST OF SALES
OPENING INVENTORY
PURCHASES
ENDING INVENTORY
GROSS PROFIT

The Expense portion of the Income Statement, however, is very similar to the template I've provided above.

Ready to move on to the next financial statement that you need to include in the Financial Plan section of your business plan? The Cash Flow Projection is next.

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