The Secrets of Financial Control For Big Businesses and Freelancing Success

Cash flow problems are the fundamental reason why companies that fail go under.

For anyone who is serious about making your venture profitable, it follows that controlling your hard earned money effectively is critical to this success.It doesn’t matter if you only have a straightforward home based industrial floor sanding concern, or are responsible for a international concern, lean finances and in particular a decent cash flow, are absolutely critical to business success.

When founding a new business it might seem impossible 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 vital to evaluating the viability of a organisation, even if you are just planning to setup a home based 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.

Our electricity prices comparison business, as with any business, has two distinct categories of business finance, income and expenses.

Under the business costs category there can be several sub-categories often falling into two seperate 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 generally 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 the reason a number of small airline and transportation companies 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 laying-off staff and cutting back on marketing. However, living by a budget may help maintain profitability but could also be counter-productive in the end.

Depending on the viability of your company it may be a better investment 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 staff. If no one takes care of the customers, 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 turnover. Many businesses will budget their controllable costs 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 money into the company and how much they have to spend on controllable expenses will be in direct relation to income. With any increase in business 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 business and paid holidays time or other perks determined by the company. These need to be built into costs when recruiting new employees into the organisation, unless you make extensive use of freelancing companies.

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

About the Author: Roger Davies, is responsible for the web design team at Advanta Productions. The company was incorporated in 2004 and provides website development and e-commerce web design services to businesses in the Midlands, specifically Nottingham, Derby and Loughborough areas. Advanta have worked on hundreds of website development and e-commerce web design projects for businesses successfully advertising and selling on-line. All enquiries on 0845 22 55 805 or visit the website.