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 are seriously interested in making your firm a success, then budgeting your dollars efficiently is critical to the security of your organisation. Whether people run a big or modest company, success is reliant on meticulously managed finances and a positive cash flow, even purely freelancing somebody will need an amount of up front money sometimes, which involves a positive cash flow.

When starting a new company it might seem difficult to put together a budget without any financial history on which to base sales and expenses. However a business plan, before you even start, with some idea of costs and turnover is vital to evaluating the potential of a company, even if you are just planning to setup a home based 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 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 businesses, because it’s human nature to underestimate what we need to spend and over estimate what we will earn.

Here at Electricity Prices Comparison the same two areas of business finance affect us, as with all businesses there is income and there are expenses, ideally the former is greater than the latter.

Under the business costs category there can be many sub-categories often falling into 2 main areas of controllable expenses and uncontrollable expenses. While many business owners and freelancers believe they can control every cost 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 responsible for a number of small airline and transportation firms going out of business as their fuel costs skyrocketed.

Other expenses such as payroll, insurance 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 expenses by laying-off employees and cutting back on advertising. 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 takes care 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 money and these are through set amounts or as a percentage of income. Many organisations will budget their controllable costs 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 revenue 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 vacation time or other staff benefits determined by the employer. These need to be built into costs when recruiting people into the business, unless you make extensive use of freelancing companies.

While you may feel that a budget is difficult to compile for a new organisation, it is vital to establish a healthy and sound financial base on which success can be built for the coming years.

About the Author: Roger Davies, is the web design team leader at 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.