Dec
20
The Secrets of Financial Budgeting For Big Businesses and Freelancing Success
Filed Under General Interest
Cash flow problems are the fundamental reason why companies that fail go under.
If you are serious about making your business a success, then managing your money effectively is critical to this success. Irrespective of whether you run a small home operated freelancing organisation, or are responsible for a nationwide business, the same financial rules apply and keeping a very careful reign on business expenses and maintaining a positive cash flow is essential to the success of any business.
When starting a new company it might seem difficult to put together a budget without any financial background on which to base sales and expenses. However a business plan, before you even start, with some idea of costs and revenues is vital to assessing the potential of a organisation, even if you are just planning to setup a work at home freelancing business. 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 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 businesses, because it’s human nature to underestimate what we need to spend and over estimate what we will earn.
As all businesses do the electricity price comparison business we run has two categories of business finance, income and expenses.
Under the business costs category there can be other sub-categories often falling into two main areas of controllable expenses and uncontrollable expenses. While many business owners and freelancers believe they can control every cost 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, transportation and advertising can be subject to a budget, but they are considered controllable expenses. If the revenue begins to fall off, you can control some of these costs by laying-off staff 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 business it may be a better option to bite the financial bullet on employee wages and still provide excellent 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 customers to care for.
There are 2 ways to budget your business money and these are through set amounts or as a percentage of sales. Many companies will budget their controllable expenses by the pound and non-controllable by percentage of income. 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 income. 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 expenses that fall into the payroll account such as worker’s compensation charges, National Insurance tax paid by the business and paid holidays time or other staff benefits determined by the company. These need to be built into costs when recruiting staff into the company, unless you make extensive use of outsourcing organisations.
While you may feel that a budget is difficult to compile for a new company, 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 web design team-leader for Advanta Productions. Advanta was formed in 2004 to provide highly affordable, highly skilled website development and e-commerce web design services to businesses in the Midlands areas. Roger’s team work on website development and e-commerce web design projects for successful businesses advertising and selling via their websites. All enquiries to 0845 22 55 805 or at the Advanta website.
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