1 guide on the topic “Income Statement”: legal obligations, concrete procedures, costs and deadlines.
The income statement measures a business's economic performance over a financial year. It sets turnover against costs to show a profit or a loss. This page helps founders and SME managers read it, then build it into a financial forecast.
It answers one question: does your business create value? A banker therefore looks at it first. So do partners and investors. Yet a profit on paper does not guarantee cash in the bank.
A sale invoiced in January but paid in March shows this gap clearly. It counts towards January's performance, although the money only arrives in March. That explains why a profitable company can still run short of cash.
You read it from top to bottom, through successive balances.
Each balance tells a story. A low gross margin signals a price too low or purchases too expensive. A negative EBITDA shows that the business does not cover its fixed costs. Finally, a positive net profit indicates that the model holds after interest and depreciation.
In a forecast, everything starts with sales assumptions. Start from price and volume, never from a global figure. For example, a graphic designer bills 450 euros a day and aims for 10 days a month. She thus reaches 4,500 euros a month at cruising speed, but not from the first month.
Then list fixed and variable costs, without forgetting your own pay. Investments only enter gradually, through depreciation. Finally, present at least two scenarios, including a cautious one with lower sales.
Our guide to the three key tables shows how the income statement fits with cash flow and financing. The complete financial forecast guide details the seven-step method.
Reading the figures over several years adds another layer. A rising turnover with a shrinking margin, for instance, often hides a pricing problem. Likewise, fixed costs that grow faster than sales quickly erode profit. Compare each forecast year with the previous one, and explain every sharp change. A banker will ask about those gaps anyway, so prepare clear answers in advance. Your accountant can also compare them with sector benchmarks.
The financial plan required when founding an SRL also includes a projected income statement. Our guide to the mandatory financial plan explains what the law requires. Annual accounts filed with the National Bank contain an income statement too. You can consult those of other companies on the NBB website, a useful basis for comparison.
