The Secrets of Financial Monitoring For Big Businesses and Freelancing Success

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

If you are serious about making your business a success, then managing your money effectively is critical to the security of your organisation. 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 establishing a new business it might seem difficult to put together a budget without any financial background on which to base income and expenses. However a business plan, before you even start, with some idea of costs and turnover is vital to determining the potential of a organisation, even if you are just planning to setup a work at home 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 refurbishing 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 organisations, 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 other sub-categories usually 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 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 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 building repairs can be subject to a budget, but they are considered controllable expenses. If the business begins to fall off, 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 turn against you in the end.

Depending on the viability of your organisation it may be a better investment to bite the financial bullet on employee wages and still provide good 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 customers to care for.

There are 2 ways to budget your business finance and these are through set amounts or as a percentage of income. Many organisations 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 organisation 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 income.

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 staff benefits determined by the organisation. These need to be built into costs when recruiting new employees into the organisation, unless you make extensive use of freelancing services.

While you may feel that a budget is impossible to establish 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 Manager at Advanta Productions Ltd and oversees a web developer team serving businesses in Nottingham, Derby, Loughborough and other areas in the Midlands. Advanta have successfully completed hundreds of website development projects. For website development enquires or to advertise your business on-line telephone 0845 22 55 805 or visit the website.