We are independent & ad-supported. We may earn a commission for purchases made through our links.
Advertiser Disclosure
Our website is an independent, advertising-supported platform. We provide our content free of charge to our readers, and to keep it that way, we rely on revenue generated through advertisements and affiliate partnerships. This means that when you click on certain links on our site and make a purchase, we may earn a commission. Learn more.
How We Make Money
We sustain our operations through affiliate commissions and advertising. If you click on an affiliate link and make a purchase, we may receive a commission from the merchant at no additional cost to you. We also display advertisements on our website, which help generate revenue to support our work and keep our content free for readers. Our editorial team operates independently of our advertising and affiliate partnerships to ensure that our content remains unbiased and focused on providing you with the best information and recommendations based on thorough research and honest evaluations. To remain transparent, we’ve provided a list of our current affiliate partners here.

How Do I Choose the Best pro Forma Model?

By Osmand Vitez
Updated May 16, 2024
Our promise to you
SmartCapitalMind is dedicated to creating trustworthy, high-quality content that always prioritizes transparency, integrity, and inclusivity above all else. Our ensure that our content creation and review process includes rigorous fact-checking, evidence-based, and continual updates to ensure accuracy and reliability.

Our Promise to you

Founded in 2002, our company has been a trusted resource for readers seeking informative and engaging content. Our dedication to quality remains unwavering—and will never change. We follow a strict editorial policy, ensuring that our content is authored by highly qualified professionals and edited by subject matter experts. This guarantees that everything we publish is objective, accurate, and trustworthy.

Over the years, we've refined our approach to cover a wide range of topics, providing readers with reliable and practical advice to enhance their knowledge and skills. That's why millions of readers turn to us each year. Join us in celebrating the joy of learning, guided by standards you can trust.

Editorial Standards

At SmartCapitalMind, we are committed to creating content that you can trust. Our editorial process is designed to ensure that every piece of content we publish is accurate, reliable, and informative.

Our team of experienced writers and editors follows a strict set of guidelines to ensure the highest quality content. We conduct thorough research, fact-check all information, and rely on credible sources to back up our claims. Our content is reviewed by subject-matter experts to ensure accuracy and clarity.

We believe in transparency and maintain editorial independence from our advertisers. Our team does not receive direct compensation from advertisers, allowing us to create unbiased content that prioritizes your interests.

A pro forma model is a method a company uses to put together documents or information that are estimates of future transactions. The most common pro forma documents are typically financial statements that contain expected dollar amounts from future business activity. To choose the best, companies must look at the data inputs available and decide what the pro forma statements will look like and who will be using the statements for making decisions. Another example of a pro forma document is a trade invoice that includes items in a future transaction. Though the business has yet to complete the transaction, the documents simply declare the value of items in a potential future transaction.

The inputs that go into a pro forma model can dictate which model to use when attempting to create forward-looking documents. As in the examples above, one model was for financial statements and another for trade invoices. Each of the models is for a specific type of information, leading to the creation of a specific model. With this in mind, a company can potentially have more than one pro forma model in place for business activities. Having more than one model in place for pro forma documents allows a company to accurately predict many different types of business activity.

A pro forma model most likely has a standard form that produces the same document in terms of format. Individuals who prepare a pro forma model may need to keep this output format in mind when choosing a model in the first place. For example, pro forma financial statements most likely need to look like the actual financial statements prepared by the accounting department. The same is true for trade invoices, where the estimates should be in a format similar to the actual invoice. Having a pro forma model that produces a different output than the traditional output may create confusion in the company.

One final consideration for a pro forma model is the users of the information. Individuals who use the information may not have all the same needs for the data. Therefore, the company may need models that provide data for owners and executives and another for operational managers. In some cases, the same pro forma model may be able to create the required outputs for each individual through minor changes in the inputs placed into the model. These models are most likely for internal stakeholders rather than outside stakeholders.

SmartCapitalMind is dedicated to providing accurate and trustworthy information. We carefully select reputable sources and employ a rigorous fact-checking process to maintain the highest standards. To learn more about our commitment to accuracy, read our editorial process.
Discussion Comments
SmartCapitalMind, in your inbox

Our latest articles, guides, and more, delivered daily.

SmartCapitalMind, in your inbox

Our latest articles, guides, and more, delivered daily.