Projected monthly or annual income. This method works best if your collections are predictable and timely. One drawback of this approach is the fact that cash flows are not always immediate or uniform. Another is that it is far from comprehensive, as it does not include billable and non-billed time. But many mediators are not trained to analyze financial statements or may not receive them frequently.
Cost is another disadvantage.
Of course, you could purchase accounting software, but you still need to know how set up the system, input the data, and read and analyze the output. But I believe the single greatest drawback to financial statements is that they do not report or analyze non-monetary information , information that can have a substantial impact on your business. You know that, other things being equal, lowering your rate should increase business and raising it decrease business. At some point along the continuum of possible billing rates is the one that, taking into consideration a number of factors, maximizes profit. While this approach has much to commend it, there are so many variables that it is difficult for the average consultant to implement.