The Secrets of Financial Control For Big Businesses and Freelancing Success
Cash flow challenges are the fundamental reason why companies that fail close down.
If you’re seriously interested in making your small business profitable, then controlling your hard earned money properly is crucial to this success. Intended for discovering new work this has always been my favourite website that I take advantage of every day as the key way to obtain new jobs.
When establishing a new business it might seem impossible to put together a budget without any financial history on which to base sales and costs. However a business plan, before you even start, with some idea of expenses 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 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 organisations, because it’s human nature to underestimate what we need to spend and over estimate what we will earn.
As with all businesses our become a doctor business has two categories of company finance, income and expenditure.
Under the expense category there can be other sub-categories usually falling into 2 main areas of controllable expenses and uncontrollable expenses. While many business directors 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 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 sales begins to reduce, you can control some of these costs by making redundant staff and cutting back on marketing. However, living by a budget may help maintain profitability but could also be counter-productive 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 clients to care for.
There are 2 ways to budget your business finance and these are through set amounts or as a percentage of turnover. Many organisations will budget their controllable expenses 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 company and how much they have to spend on controllable expenses will be in direct relation to sales. 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 income.
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 holidays time or other staff benefits determined by the company. These need to be built into costs when recruiting staff into the organisation, unless you make extensive use of outsourcing companies.
While you may think a budget is impossible to establish for a new organisation, it is vital to establish a healthy and sound financial foundation on which success can be built for the future.
About the Author: Roger Davies, is the Managing Director for Advanta Productions and is responsible for a web developer unit based in the Midlands serving businesses in the Nottingham, Derby and Loughborough areas. Advanta have worked on hundreds of web development projects. If your website needs development or if you want to sell on-line contact Roger on 0845 22 55 805 or via the website.
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