The Secrets of Financial Budgeting For Big Businesses and Freelancing Success
Cash flow deficiencies are the fundamental reason why companies that fail go under.
For anyone who is serious about making your business profitable, then controlling your dollars efficiently is crucial to this success.Whether people run a vast or small business, success is dependent on wisely handled finances and a positive cash flow, even plainly industrial floor cleaning one will require an amount of up front capital from time to time, which involves a positive cash flow.
When establishing a new company it might seem difficult to put together a budget without any financial history on which to base income and costs. However a business plan, before you even start, with some idea of costs and turnover is essential to assessing the potential of a business, even if you are just planning to setup a work at home freelancing business. It might seem like guesswork to start with, but a tentative budget can be established with some thought and projections of future business. From some past experience in renovating houses, I always say ‘think of a figure and double it’ and then you will be near the mark. I think this is true for other companies, because it’s human nature to underestimate what we need to spend and over estimate what we will earn.
The ‘how to make cake‘ website business run by one of our clients, as with any business, has two distinct categories of business finance, income and expenses.).
Under the expense category there can be several sub-categories mainly falling into two distinct areas of controllable expenses and uncontrollable expenses. While many business owners and freelancers believe they can control every expense involved in their company, this is not always the case. Some things such as services costs, the amount of rent and other supposed fixed costs can, and do change, with the owner having no control. For example the recent increase in gas prices are an example of this and have been the reason a number of small airline and transportation firms going out of business as their fuel costs skyrocketed.
Other expenses such as payroll, transportation and building repairs can be subject to a budget, but they are considered controllable expenses. If the revenue begins to reduce, you can control some of these expenses by making redundant staff and cutting back on advertising. However, living by a budget may help maintain profitability but could also turn against you in the long run.
Depending on the viability of your company it may be a better option to bite the financial bullet on employee wages and still provide good customer service to the remaining customers until business picks up again, or consider outsourcing and freelancing for when you need a bit of extra help but without having to hire new employees. If no one takes care of the customers, it will not be long until there are no more customers to care for.
There are 2 ways to budget your business money and these are through set amounts or as a percentage of income. Many companies will budget their controllable expenses by the pound and non-controllable by percentage of sales. Obviously a good part of the owner’s time is going to be based on bringing sales into the company and how much they have to spend on controllable expenses will be in direct relation to sales. With any upturn in sales the owner will probably need the extra help to take care of the business so a percentage of income will go to more wages, thus freeing the owner to focus on generating additional sales.
There are many other costs that fall into the payroll account such as worker’s compensation charges, National Insurance tax paid by the company and paid holidays time or other staff benefits determined by the organisation. These need to be calculated into costs when recruiting new employees into the business, unless you make extensive use of freelancing services.
While you may feel that a budget is hard to establish for a new business, it is essential to establish a healthy and sound financial foundation on which success can be built for the coming years.
About the Author: Roger Davies, is the Manager at Advanta Productions Ltd and oversees the web developer team serving businesses in Nottingham, Derby, Loughborough and other areas in the Midlands. Advanta have successfully completed hundreds of website development projects. For website development enquires or to advertise your business on-line telephone 0845 22 55 805 or visit the website.
This entry was posted on Friday, August 26th, 2011 at 4:03 am and is filed under General. You can follow any responses to this entry through the RSS 2.0 feed. Both comments and pings are currently closed.