10 Tips to Understand Venture Debt with Trinity Capital Inc.
Sometimes, things don’t go your way. You may find yourself scrambling to fix your budget when things have not turned out how you thought they would! But don’t panic, here are things you can do to fix your conundrum and how to avoid one in the future.
Let’s say that you have an approved budget, but nearing the end of Q1 you know things are NOT looking good. Here’s what you can do to get back on track.
Before you absolutely freak out, this is super common! The easiest thing you can do to stay on track is to reforcast EVERY month. Take your budget and put your actuals in. That way, you can see what your year-end looks like if the budget doesn’t change at all. This helps you see where you come across versus what your targets initially were.
If you have totally missed your targets for Q1, it’s not uncommon to do a 6×6 budget. This means, after 6 months, you do a rebudget. Problem is, a rebudget is a lot of work. Like, a LOT. To conduct a rebudget, you want to look at all of your assumptions and note where you need to invest and where you need to pull back. Make sure that as you look at the rest of the year, you go in with the goal of not going to rebudget again.
Budgets are the blueprint for business when looking at the year ahead, so they are INSANELY important. Doing a monthly reforcast with your PNL will help you make sure you don’t have to go and rebudget everything.
To make sure you are on top of your budget, there are a few things you can focus on:
- Annual budget
- Ask your accountant to close ideally within 10 days of the end of the month (NO more than 15 days).
- Balance sheet and income statement.
- Reforcast with your actuals.
- Compare your budget with your actuals (look at each variance and give an explanation for each one!).
- Weekly cash flow statements looking 16 forward.
- Profitability Metrics (each month before you close, look at all of your invoices, revenue, and all the different cash-based things you can calculate on your own. Then calculate all of your profitability KPI’S).
With these in mind, you’re gonna do great! And we can help with any bumps in the road, as always.