Pro forma financial statements
Learn what pro forma financial statements are, why they matter, and how to build them for your business.
November 2023 | Published by Xero
Published Thursday 23 July 2026
Table of contents
Key takeaways
- A pro forma financial statement predicts future financial results using estimated data and assumptions.
- There are 3 main types: a pro forma profit and loss statement, a pro forma balance sheet, and a pro forma cash flow statement.
- They help you plan a budget, model different scenarios, and make your case to lenders or investors.
- They're based on estimates, so they're a planning tool rather than a record of actual, audited results.
What is a pro forma financial statement?
A pro forma financial statement is a document that predicts future financial results using estimated data. Instead of reporting what has already happened, it shows what your numbers could look like based on a set of assumptions.
Think of it as a what-if version of your accounts. You start with assumptions about things like sales growth, pricing, or a new hire, then work out how those choices might play out across your finances.
Small business owners, accountants, and finance teams build pro forma statements to plan ahead and test decisions before committing to them.
Reasons to use pro forma financial statements
Pro forma statements turn a plan or an idea into numbers you can actually work with. Here are some of the main reasons to build one.
- Support a loan or financing application with forward-looking numbers
- Build and test a budget before your financial year starts
- Plan investments in equipment, staff, or new premises
- Benchmark expected performance against your past results
- Model different scenarios to guide bigger decisions
- Make your case when raising capital from investors
Types of pro forma financial statements
Pro forma statements mirror the 3 core reports that make up a set of accounts. Each one projects a different part of your financial picture.
- Pro forma profit and loss statement: projects your future revenue, costs, and profit over a set period.
- Pro forma balance sheet: estimates what your assets, liabilities, and equity could look like at a future date.
- Pro forma cash flow statement: forecasts the cash moving in and out of your business, much like a cash flow forecast.
Pro forma vs standard financial statements
The difference comes down to timing. Standard financial statements report actual results from the past, using confirmed figures from your accounts.
Pro forma statements do the opposite. They project future or hypothetical results based on assumptions, so you can see where a decision might take you.
It's also worth clearing up a common mix-up. A pro forma financial statement isn't the same as a pro forma invoice, which is a preliminary bill sent to a customer before a sale is confirmed.
How to create a pro forma financial statement
Building a pro forma statement is mostly about starting with solid numbers and making clear assumptions. Follow these steps to put one together.
- Gather your historical financial data, such as past sales, costs, and cash flow.
- Set your assumptions about what will change, like growth rates or new expenses.
- Project your revenue and costs across the period you want to plan for.
- Build the 3 statements: your profit and loss, balance sheet, and cash flow.
- Test different scenarios to see how your numbers respond to change.
Keeping your records tidy makes this far easier, and staying on top of managing finances and cash flow gives you accurate data to build on.
Limitations of pro forma financial statements
Pro forma statements are useful, but they have clear boundaries. Keep these limitations in mind before you rely on the numbers.
- They're built on estimates, so they're only as reliable as your assumptions.
- They're sensitive to change, and small tweaks can shift the results significantly.
- They aren't audited or a record of your actual performance.
- They have no formal reporting standing under New Zealand accounting standards.
Plan ahead with Xero
Good projections start with clean, up-to-date numbers you can trust. With real-time data and simple reporting in Xero, you can see where your business stands today and plan for where it's heading. Get one month free.
FAQs on pro forma financial statements
Here are some frequently asked questions about pro forma financial statements to help you put them to work.
Are pro forma financial statements legally required in New Zealand?
No, they're optional planning documents. New Zealand reporting standards apply to your actual financial statements, not to projections.
How far into the future should a pro forma statement project?
Most cover 1 to 3 years ahead. The right timeframe depends on your goal, such as a loan term or a growth plan.
Can I create pro forma statements in accounting software?
Yes. Accounting software can pull your historical data and help you build projections faster.
What's the difference between a pro forma statement and a forecast?
A forecast usually predicts one likely outcome, while pro forma statements often model several what-if scenarios. Both rely on estimates rather than confirmed results.
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Disclaimer
This glossary is for small business owners. The definitions are written with their requirements in mind. More detailed definitions can be found in accounting textbooks or from an accounting professional. Xero does not provide accounting, tax, business or legal advice.