The Secrets of Financial Budgeting For Big Businesses and Freelancing Success

Cash flow challenges are the fundamental reason why companies that fail close down.

For anyone who is serious about making your business profitable, it follows that controlling your money effectively is essential to the security of your organisation.Regardless of whether somebody only manage a smallish freelancing firm, or are responsible for a company with a national company, rigorously run finances as well as healthy cash flow, are imperative to the advancement of the organization.

When starting a new enterprise it might seem impossible 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 essential to assessing the viability of a organisation, 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 properties, 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 business costs category there can be many sub-categories often falling into two main areas of controllable expenses and uncontrollable expenses. While many business directors 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 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, transportation and building repairs 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 making redundant employees and cutting back on advertising. However, living by a budget may help maintain profitability but could also turn against you 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 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 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 money and these are through set amounts or as a percentage of revenue. Many organisations 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 revenue into the business and how much they have to spend on controllable expenses will be in direct relation to income. With any upturn 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 expenses that fall into the payroll account such as worker’s compensation charges, National Insurance tax paid by the employer and paid vacation time or other perks determined by the company. These need to be calculated into costs when recruiting new employees into the company, unless you make extensive use of outsourcing companies.

While you may think a budget is difficult to compile for a new organisation, 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 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.