The Secrets of Financial Budgeting For Big Businesses and ...

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

For anyone who is serious about making your small business profitable, it follows that managing your money properly is crucial to this success.Whether you run a straightforward work at home firm industrial floor sanding graphic design tasks or manage a multinational company, well handled accounts and in particular a healthy small business cash flow, are crucial.

When establishing a new business 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 revenues is essential 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 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 companies, because it?s human nature to underestimate what we need to spend and over estimate what we will earn.

The lamb cooking website business run by one of our clients, as with any business, has two distinct categories of business finance, income and expenses.

Under the expense category there can be several 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 expense involved in their company, 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 businesses 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 sales begins to fall off, you can control some of these expenses by making redundant staff and cutting back on advertising. However, living by a budget may help maintain profitability but could also be counter-productive in the end.

Depending on the viability of your business it may be a better investment to bite the financial bullet on employee wages and still provide good customer service to the remaining clients 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 customers, it will not be long until there are no more clients to care for.

There are 2 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 sales 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 company and paid vacation time or other perks determined by the company. These need to be calculated into costs when recruiting people into the company, unless you make extensive use of freelancing services.

While you may think a budget is hard to compile for a new organisation, it is essential to establish a healthy and sound financial footing on which success can be built for the future.

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.

Inspiration thanks to Mijas, Spain

Source: http://4odor.com/2011/the-secrets-of-financial-budgeting-for-big-businesses-and-freelancing-success

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