The Secrets of Financial Monitoring For Big Businesses and Freelancing Success

Cash flow challenges are the fundamental reason why companies that fail go out of business.

If you are seriously interested in making your business a success, then managing your money effectively is critical to this success. Freelancing, services based and product based businesses today remain successful in the current economic environment to the exact degree to which they appreciate how important it is to continuously monitor business expenses in order to stop overheads getting out of control.

When founding a new business it might seem difficult 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 vital to determining the viability of a organisation, even if you are just planning to setup a work at home freelancing operation. 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 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 most businesses our electricity price comparison company has two financial categories, business income and business expenses.

Under the expense category there can be many sub-categories often falling into two seperate areas of controllable expenses and uncontrollable expenses. While many business proprietors 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 businesses 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 reduce, you can control some of these costs 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 customers, it will not be long until there are no more customers to care for.

There are 2 ways to budget your business money and these are through set amounts or as a percentage of sales. Many businesses 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 money into the company and how much they have to spend on controllable expenses will be in direct relation to income. 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 revenue.

There are many other costs 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 staff benefits determined by the organisation. These need to be built into costs when recruiting people into the business, unless you make extensive use of outsourcing organisations.

While you may feel that a budget is impossible to establish for a new company, 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 Advanta Productions most experienced web developer managing a team of developers serving businesses in the Nottingham, Derby & Loughborough areas in the Midlands. Advanta regularly work on website development and e-commerce web design projects for businesses successfully advertising and selling on-line. For enquiries telephone 0845 2255 805 or visit our website.

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