The Secrets of Financial Budgeting For Big Businesses and Freelancing Success
Cash flow deficiencies are the fundamental reason why companies that fail close down.
If you’re serious about making your business a success, it follows that controlling your dollars effectively is crucial to the security of your organisation.Regardless of whether a person only manage a simple floor sanding & sealing business, or regulate your multi million dollar company, tightly monitored accounts as well as a good cash flow, will be critical factors in small business success.
When starting a new enterprise it might seem hard to put together a budget without any financial history on which to base income and expenses. However a business plan, before you even start, with some idea of expenses and revenues is essential to evaluating the potential of a organisation, even if you are just planning to setup a home based freelancing operation. It might seem like guesswork at the beginning, but a tentative budget can be established with some thought and projections of future business. From some past experience in refurbishing buildings, 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 businesses, because it’s human nature to underestimate what we need to spend and over estimate what we will earn.
Like most businesses usually have, our clients’ business at http://howtomakecake.org has two main categories, income and expenses.
Under the business costs category there can be other sub-categories mainly falling into 2 distinct areas of controllable expenses and uncontrollable expenses. While many business proprietors and freelancers believe they can control every expense involved in their business, 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 electricity prices are an example of this and have been responsible for a number of small airline and transportation companies going out of business as their fuel costs skyrocketed.
Other expenses such as payroll, insurance 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 costs by making redundant employees and cutting back on marketing. 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 organisation it may be a better investment 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 supports of the clients, it will not be long until there are no more clients to care for.
There are two ways to budget your business finance and these are through set amounts or as a percentage of sales. Many companies will budget their controllable costs by the pound and non-controllable by percentage of revenue. Obviously a good part of the owner’s time is going to be based on bringing sales into the business and how much they have to spend on controllable expenses will be in direct relation to income. With any increase 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 revenue.
There are many other expenses that fall into the payroll account such as worker’s compensation charges, National Insurance tax paid by the employer and paid vacation time or other perks determined by the company. These need to be calculated into costs when recruiting staff into the company, unless you make extensive use of freelancing companies.
While you may feel that a budget is difficult to establish for a new company, it is essential to establish a healthy and sound financial base on which success can be built for the future.
About the Author: Roger Davies, is senior web developer for Advanta Productions a web development company located in the Midlands serving businesses in the Nottingham, Derby and Loughborough areas. Roger and his team have created literally hundreds of web sites. If you need your website developing or want to advertise your business on-line contact Advanta on 0845 22 55 805 or visit the web site.
