A pro forma financial statement is a financial statement that is prepared in advance of a specified event. The event could be an anticipated transaction, such as the sale of a piece of equipment, or an actual transaction that has already occurred, such as the closing of a fiscal period. Pro forma financial statements are important to a business because they provide a way to plan for and track the financial impact of events that have not yet occurred. There are two main approaches to preparing pro forma financial statements: the bottom-up and the top-down approaches. The bottom-up approach begins with an analysis of the components that make up the pro forma statement, such as income, expenses, assets, and liabilities. This approach is often used when there is a limited amount of information available about the event that is being projected. On the other hand, the top-down approach begins with a high-level overview of the financial statement and then breaks down the individual components. This approach is often used when a large amount of information is available about the event being projected (Crum, M., & Rayhorn, C. 2019). The choice of approach will depend on the specific situation and the available information. Whichever approach is used, the goal is to create a pro forma financial statement that is as accurate as possible so that the business can make informed decisions about the event that is being projected. The Olive Fruit organization is a non-profit organization that helps needy people by providing them with olive trees. The organization also offers other benefits to its members, such as discounts on olive products and invitations to olive-themed events. I would consider joining this organization as it is a great way to help people in need and learn more about olives and olive products. The Olive Fruit website also has an upcoming event that I would consider attending: a talk on olive oil production in Italy. This event would be a great opportunity to learn more about olives and meet other people interested in this topic. I think the benefits of joining and networking with the Olive Fruit organization would be invaluable

Reference 

Crum, M., & Rayhorn, C. (2019). Using Monte Carlo Simulation for Pro Forma Financial Statements. Journal of Accounting and Finance, 19(5), 29-40. 

1) What is Pro-Forma Financial Statement and why is it important to a business? What are recommended approaches to prepare Pro-forma Financial Statements for a small business based on your research?

A Pro-Forma financial statement is one that is calculated using financial projections or presumptions of conditions that have occurred in the past and may occur in the future (Tuovila, 2022).  Pro-Forma financial statements may not be in compliance with generally accepted accounting principles (GAAP) (Tuovila, 2022).  The Pro-Forma statement lets someone see what would happen if say the business received a $50,000 loan and shows the income, account balances and cash flow should the business receive the loan (Warnes, 2022).

Pro-Forma statements have to be marked “Pro-Forma” and they cannot be used for preparing taxes (Warnes, 2022).  Using unmarked Pro-Forma statements can mislead investors, IRS and financial institutions (Warnes, 2022).  The Pro-Forma business statements are important because they can be used to create business plans and to create financial forecasts (Warnes, 2022).  It can also be used to obtain financing because you can use the Pro-Forma statement to show how the money will be used to grow the business (Warnes, 2022).

The recommended approaches to prepare a PRO-Forma statement are to calculate the estimated revenue projections by using realistic assumptions and be conservative with your assumptions (Tuovila, 2022).  The next step is to estimate the liabilities and costs the business will likely incur (Tuovila, 2022).  Those two steps are used to determine the projected net income on the PRO-Forma statement.  The final step is to estimate the cash flow of the business (Tuovila, 2022).  This identifies the net effect on cash should the change be implemented (Tuovila, 2022).

2) Research a small business organization in your area or your State.  Would you join this organization? Is there anything on their website, such as an upcoming event, that you would consider attending? What the benefits of joining and networking?

The Virginia Craft Brewers Guild is an organization that was put into place in order to provide growth to Virginia craft breweries and to help pass legislative changes that are needed (Unknown, Advocacy).  This organization has many events throughout the year including a Virginia Craft Beer Cup Competition where all of the breweries in the guild brew their best beer and try to win the competition.  The guild has several different committees; government affairs, tourism and marketing, farm brewery, quality and operations and the Virginia Craft Beer Cup leaders (Unknown, About).  All of the committees are made up by people from the breweries in the guild.

The Virginia Brewers Guild website has a directory with links and contact information for many local and non-local companies that sell supplies, ingredients and equipment for craft breweries making it easy to locate suppliers.  The are some other benefit packages the guild offers that typically people employed at a small brewery do not receive.  They offer insurance, 401k, training, discounted office supplies and Microsoft Office for Business and Home use.

I would definitely join the Virginia Craft Brewers Guild if I open a brewery in Virginia.  There are many benefits to gain from doing so such as being able to offer discounted benefits plans to employees.  The guild hosts lots of events that are great networking opportunities.  Most of the events they hold now I am interested in, but currently cannot attend because I am not a member and do not planning on joining soon.  One event is on “Distributer Relations” which would be very beneficial to a new a brewery and possibly even an existing one in case they need to upgrade how they are operating.  The guild offers a membership for breweries in planning, but I still awhile before I consider joining.

References

Tuovila, A. (2022, February 3). Pro Forma. Retrieved from Investopedia: https://www.investopedia.com/terms/p/proforma.asp

Unknown. (n.d.). About. Retrieved from Virginia Craft BRewers Guild: https://www.virginiacraftbrewers.org/

Unknown. (n.d.). Advocacy. Retrieved from Virginia Craft BRewers Guild: https://www.virginiacraftbrewers.org/advocacy/

Unknown. (n.d.). Members Benefits. Retrieved from Viriginia Brewers Guild: https://www.virginiacraftbrewers.org/member-benefits/

Warnes, B. (2022, April 21). Pro Forma Financial Statements (with Templates and Examples). Retrieved from Bench: https://bench.co/blog/accounting/pro-forma-financial-statements/