Speaker 1: Welcome back to the Clara CFO Group channel. If you have been watching the channel recently, you have known or figured out that we are talking about budgeting. It is what we like to call budgeting season over here. We are in the fourth quarter of the year. This can be helpful throughout the year, of course, but we wanted to give also people some timely information. So for those who are subscribed to the channel, they can get this kind of real-time help as they start preparing their budgets for the next year. Today, we're going to talk about the difference between a budget and a rolling forecast, because sometimes I hear the term forecast and budget sort of used interchangeably sometimes, and they really, although they might be based on similar numbers, they actually should be used differently. So that is what this video is about. So if that sounds interesting, I am going to get into it in just a second. But at first, I would love for anybody who's not already subscribed to the channel to subscribe. I would love to have you here and that you can get this information on a timely manner. We try to do videos in the time of the year that it makes sense to think about some of those things. So we're doing budgeting. We're also going to be talking about payroll providers. So if you are thinking about changing your payroll provider before the end of the year, you're going to want to check out some of those videos because we're going to do some walkthroughs of some different platforms. So really trying to be timely here for you as you're trying to make decisions and trying to do stuff and plan for your next coming year. All right. So we'd love to have you here as a subscriber. All right. So one thing that's very, very, very important to understand about budgets is that we do the budgeting process and then we have a budget. We have a final deliverable. We have a product of a document if it's digital or if it's paper or somebody prints it out. It is a budget. It is a guide of where we're going to spend our money for the next year. Okay. What we should be doing with a budget is we should be kind of locking it in and creating it. We can call it a plan of record. We can call it static. We can call it like final, whatever you want to call it. But our budget should really be like locked in for the year because we made a budget based on what we knew at the time. And then we can do our budget to actual reporting every year or every month and see like how we're doing compared to the budget. What this is helpful for is it helps us identify why things are different on the financials than what we had actually planned for. Okay. So as the year goes on, there's going to be certain expenses or certain revenue that might get further and further and further away from the original plan and the budget. And expense is the same thing. Like maybe you didn't budget to hire a marketing consultant and then you did. And so they can be very expensive. And then all of a sudden your marketing budget is way more than you had or your marketing actual spend is way more than the budget that you had. So that can happen. And so what we want to be doing ideally is creating a second document called a rolling forecast that we can tweak and change as time goes on and as we know more information. So we gather a piece of information and we adjust the financial plan, which was the budget. So we kind of take the budget and then you lock one and you say, that's the budget. That's a plan that we created at the beginning of the year. But then we also have another plan that is also helping us kind of tweak and not get too far off so that we kind of still know the trajectory that we're going. Because let's say you anticipated revenue to be 50% growth year over year in your budget, but then January, February, March happened and you're not growing at all. Your revenue, if anything, it's like almost declining a little bit. You don't want to be looking at your financial projection of your budget and thinking that's where I'm going. Like you're going to have to make up a lot of revenue if you, you know, we're thinking you were on that path. If that's what you think the rest of the year is going to look like. So the rolling forecast is a moving, living, breathing document that you change every single month and that you look at and you say, okay, well now this decision has been made, so this expense is different. This client left and so now revenue is down based on, you know, so it's not going to be hitting what we thought for the budget. It's actually lower. So all of those kind of things you can adjust in a rolling forecast. And then you can compare to a rolling forecast how you're doing. Like, did you do what you thought you were going to do? Or you can compare to your budget. But I want to show you in Excel kind of what this could practically look like. We use Giraffe to do our rolling forecasts as well as our budgeting, which I've talked to you guys about. I really like the way that they have, have it done. You can pull in the actuals from the most recent financial month and then you can adjust anything going forward. So maybe if you have a forecast built on the number of clients that you have and the clients is lower than what you thought it was going to be, then it can adjust the forecast. Okay. So, but I want to show you guys specifically in Excel what this could potentially look like. So I've taken from a couple videos ago, we had the budget video or we had, we, I showed you guys how to create a budget. So I have the budget over here. And so what I want to say is like, or what I want to show you is how this could be potentially modified over time. Let's say we lock this in and that January and February were actually pretty much spot on to the budget. Like we, we kind of knew what our revenue was going to be at that point. But we're getting into March. So let's say that all of these, let's say everything March and December, let's just highlight those gray because that's future. And just kind of to keep an eye on it, let's 89,000 was the profit plan for the year. Oops. Let's just do. Okay. So we're going to lock that in so we can just see what that was. And as time, as the rolling forecast changes, we can see that the projection will change. So right now the budget is showing that we should be making 89,000 for the year. And let's just say January and February, for whatever reason, they were perfect. They were spot on. I just don't want to have to like make up artificial numbers for the purposes of this video, but let's get into, okay, we're in March. We are looking at our retainer income and we actually just got paid for a really big project. That was way more than we had anticipated coming in, in the month of March, it was $30,000. However, with that, we did not gain the client that we thought we were going to. Okay. So we did not gain a client, a new client that's on retainer services. So I kept that the same as February, but then I increased and I made the project services 30,000 for the month of March. However, because it's so large, we're not going to be able to take on any projects in April. Okay. So I'm going to take that out. All right. So you can see just with those few little pieces of information, our projection changed for the, for the end of the year, we are now at 82,000. Okay. So with a couple of those little changes, which really that shows you what retainer work will do, the retainer services went down pretty dramatically. And so with that, even though we had this big project, it actually put our profit down a little bit. So that might be a good strategic decision to say, Hmm, would we rather have projects in this case, or would we rather bring on a retainer client? Because it's making a big difference to the financial picture. Okay. So because I knew those things, I changed it because this is now become the rolling forecast when you start changing it. So you keep your budget, your budget static, and then you use the rolling forecast to update every month. Let's just say a couple other things happened. You actually lost an employee, but it was a part-time employee. So it wasn't like a huge amount of payroll. So we're going to take that out. I'm not going to do this across all the cells because I don't have this built in really dynamically. This is why we have models for this and software where we can just put in a termination date and have the employee's salary removed, but you get the idea. So that's going to be reducing salaries and wages. And let's say that actually we hadn't hired the bookkeeping and tax people until March. So maybe let's just take that out. And then with that, their retainer was actually 1500 rather than 1900. So we over-budgeted for it, but now we can see, okay, let's put in closer to what we know we actually will be paying so we can get a better idea of what that end of year profits going to look like. So with that, with those tweaks and changes, we actually are a little bit higher of a profit margin at 90 or profit at 98,992, which is a little bit higher of a percentage. Still not where we would like to be, but that's, these are, this is how the rolling forecast changes. So then when March is over, what you do is you can make like a copy of this, or you can, I mean, a copy is great. If you're just doing this in Excel, you would make like a second tab and then you would pull in all the actuals for March, and then you would make your adjustments for April and beyond. And, you know, this might be things like, okay, we've decided that we're going to start a new project at a certain period of time, like maybe August, we're going to hire a HubSpot consultant to come in and help us set up our HubSpot, or we're going to invest in a new software that's going to be $20,000, or we're going to put in a lot of initiative into a new training that we didn't budget for at the beginning of the year. You know, all of those kinds of things, they happen. We're running businesses, we're dynamic, like we're not just going to like know exactly every little decision that we're going to make at the beginning of the year. So the rolling forecast helps us keep on track, and it sort of helps us say like, okay, like, are we still on track to reach our goals? Or do we need to like have another initiative? Or do we need to go out and sell more? Or do we need to increase our prices? You know, what do we need to do? And you can keep your eye on your, you know, your profit goals, your income goals. And the rolling forecast helps you do that over time. Okay, I'm happy to answer any questions about rolling forecasts. Because I know that probably a lot of not a lot of people are using them, but I think they are probably one of the best tools, a rolling forecast or a cash flow forecast, you know, really, those two things can can help each other. If you're updating your cash flow forecast, it's probably using the same information that you would be putting into your rolling forecast. But the rolling forecast is based on the profit and loss statement, okay? Kind of like the budget, it's based on the profit and loss statement. So it's going to look a little different than your cash flow forecast. Okay, I think that's it. Those are the differences between a budget and a rolling forecast. Very, very simply, budgets are static, you don't change them throughout the year. Rolling forecasts are living, breathing, and they should be updated at least monthly. All right. Thanks, everybody. Talk to you later. Bye.