Page 2 of the Action Plan template is where you estimate the cash flow
for an action plan each year. If your company has a process to estimate
future sales (benefits) and the associated costs, use it.
It is important
that all action plans use
the same computations, so you can compare. Keep the process
simple; it should be self-evident to the decision
maker how you computed the numbers. You'll need gross margin, tax rates
on operations and depreciation policy from finance for the calculations.
Net "Incremental" Sales
Start with an estimate of future sales the action plan creates.
Earnings before taxes
Compute earnings before taxes by multiplying net incremental sales X
your historical gross margin.
Savings in or additional direct operational costs
Add (any incremental savings) or subtract (any
incremental expenses) for changes in your operational processes, your
direct overhead (Sales, General and Administrative - SG&A).
Earnings after taxes
Subtract your taxes. (earnings
before taxes +/- incremental direct overhead) X your historical tax rate.
Net "Incremental" Sales
