A Pro Forma is a statement of financial nature that tries to estimate a possible, albeit accurate financial situation of a firm, if the present financial trends continue or the financial assumptions made, hold to be true. Pro Forma statements, which are also called projected financial statements, create a picture of certain financial trends that may take place according to the budget of a given organization (Brooks & Mukherjee, 2010). Essentially, they provide financial projections of a given firm, for a given period in a standardized format. These statements help various financial professionals to get an understanding of an organization’s financial standing under various conditions.
Pro Forma statements are crucial when constructing the budget for a given organization, assessing the current trends of financial spending according to the current budget and projecting for the next financial year. This paper is going to look at the benefits of Pro Forma statements as a financial tool to help a nurse leader in creating or monitoring a budget for a given healthcare organization.
Essentially, the budgeting process requires a projection of what financial trends might be in play in the near future. A nurse leader can use Pro Forma statements to estimate the given financial trend a given healthcare organization might take in the next financial year. Most of the information is derived from the financial trends witnessed in the current year of the budget creation (Brooks & Mukherjee, 2010). The information contained in Pro Forma statements, which includes estimated cash requirements, is vital in estimating the budget for the next year as accurately as possible.
The main theme when creating a budget is to project actual financial trends that may occur and plan for them as accurately as possible. Pro Forma statements, therefore, help in the budgeting process by providing vital pieces of financial information that create the projections of financial needs and business profits of a given organization (Fawcett, 2013). A nurse leader can, therefore, use this financial tool, to acquire necessary information for creating a sound and appropriate financial budget for their healthcare organization.
Furthermore, an organization often includes the prospect of pursuing new business opportunities in its budget. These new opportunities are represented by business plans. Pro Forma statements assist in analyzing the projected results of different business plans to determine the most profitable business plan that suits the organization’s budget. By creating Pro Forma statements, an organization will be able to realize distinct and unique financial characteristics of business opportunities that they consider pursuing (Finkler, Jones, & Kovner, 2013).
For a budget to be accepted, various budget plans are represented to the management. The plans may vary in production expenses, sales revenues, cash flow statements and balance sheets. The management will find Pro Formas useful in determining the best-case financial scenario (budget) that aligns with its financial constraints and financial goals of the organization
Moreover, Pro Formas can also be utilized to assess the financial implications of various changes in an organization. When a healthcare organization seeks to adopt major changes in its operations, Pro Formas are used to assess the expected impact of the changes on the organization’s financial standing (Finkler et al., 2013). Pro Formas, in this instance, would be helpful by presenting the impact of these changes based on the balance sheet, cash-flow statements and income statements of the given organization.
Indeed, pro formas significant financial tools that can be used to help nurse leaders create an appropriate and accurate budget for a given healthcare organization. Also, Pro forma statements are important in analyzing business plans to determine the best plan that fits into an organization’s financial and operational goals.
References
Brooks, R., & Mukherjee, A. K. (2010). Financial management: core concepts. London: Pearson.
Fawcett, P. J. (2013). Financial management for nurse managers and executives. Aorn Journal, 97(6), 759-760.
Finkler, S., Jones, C., & Kovner, C. (2013). Financial management for nurse managers and executives. (4th ed.). St. Louis, MO. Saunders.
