This feature is included with Fathom Pro - the plan with access to all of Fathom's features. Companies on Portfolio can be upgraded to Fathom Pro at any time.

How the Profit & Loss is forecast

In Fathom, there are three main types of Profit & Loss accounts, and each account type is forecast differently. The type of account depends on its classification.

P&L Account Type	Account Classification(s)
Regular P&L accounts	Revenue, Variable Cost of Sales, Fixed Cost of Sales, Variable Expenses, Fixed Expenses, Other Income, Other Expenses
Balance Sheet-derived P&L accounts	Interest Income, Interest Expense, Depreciation & Amortisation, Adjustments, Dividends
Tax Expense accounts	Tax Expenses

📝 Note: An account’s classification can be changed in the Chart of Accounts section of the Company Settings.

Regular P&L accounts

Regular P&L accounts are forecast according to value rules. Value rules are calculations of your choice or direct entries on the Profit & Loss.

Regular Profit & Loss accounts' forecast figures can impact various Balance Sheet accounts, but they are forecast from the Profit & Loss.

Example: With a value rule, you forecast $350 in an Expense to be paid out of a Cash account on the Balance Sheet. You need to forecast the Profit & Loss value first to determine how much to reduce the Cash account on the Balance Sheet.

Balance Sheet-derived P&L accounts

Unlike Regular P&L accounts, Balance Sheet-derived Profit & Loss accounts are forecast according to schedules & journals.

These accounts are treated differently from Regular P&L accounts because movements on the Balance Sheet primarily determine their amounts. In other words, the Profit & Loss values are based on the Balance Sheet values.

Balance Sheet-derived P&L accounts are often automatically calculated based on configurations you’ve made on debt or asset accounts on the Balance Sheet.

Examples:

Interest Expense values on the Profit & Loss are determined by a loan amount and repayment schedule on the Balance Sheet.

Depreciation expenses depend on asset amounts and value changes on the Balance Sheet.

Tax Expense accounts

Tax Expense accounts are forecast according to the tax settings.

Some examples of line items you can forecast with tax expense accounts include:

Corporate Income Tax

Employer’s payroll match contributions

Employer’s pension contributions

Your Tax Settings will automatically calculate the tax expense amounts on your Profit & Loss and other tax movements.

Forecast the P&L Workflow

We suggest the following workflow for forecasting the Profit & Loss:

Set up taxes in the Tax Settings of your forecast.
1. You may have already completed this step if you're following the 'Forecast your Baseline' workflow!
Choose your value rules.
Set up journals & schedules when you forecast the Balance Sheet.

Why do we suggest this workflow?

We recommend configuring your Tax Settings first, so that your tax amounts are automatically calculated as you forecast; however, you can choose to return to this step later on.

Example: If you set up a 'Corporate Income Tax' expense as 30% of your Net Income, the Tax Expense will be automatically calculated as you forecast your remaining Profit & Loss values.

We suggest waiting to set up schedules & journals on your Profit & Loss statement, as many of them will depend on forecasting Balance Sheet movements.

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