The Product Review Center

Did you know that cash flow problems are the main reason most companies go out of business?

If you are seriously interested in making your business a success, then managing your money effectively is critical to the security of your organisation. Successful businesses, large or small, are only successful to the degree that they understand the importance of closely monitored finances and a healthy cash flow. Even the simplest of freelancing businesses have to understand this principle.

When starting a new enterprise it might seem impossible to put together a budget without any financial history on which to base income and expenses. However a business plan, before you even start, with some idea of costs and revenues is essential to determining the viability of a business, 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 renovating 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 businesses, because it’s human nature to underestimate what we need to spend and over estimate what we will earn.

Our web design Loughborough company, like any business, has two main categories of company finance, the income and the expenses.

Under the expense category there can be several sub-categories often falling into two main areas of controllable expenses and uncontrollable. While many business owners and freelancers believe they can control every expense 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 oil prices are an example of this and have been responsible for a number of small airline and transportation companies 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 business begins to fall off, you can control some of these expenses by laying-off employees and cutting back on advertising. However, living by a budget may help maintain profitability but could also turn against you in the long run.

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 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 two ways to budget your business money and these are through set dollar amounts or as a percentage of income. Many businesses will budget their controllable expenses by the dollar and non-controllable by percentage of income. Obviously a good part of the owner’s time is going to be based on bringing money into the business 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 income.

There are many other expenses that fall into the payroll account such as worker’s compensation charges, Social Security tax paid by the company and paid vacation time or other perks determined by the employer. These need to be calculated into costs when recruiting people into the business, unless you make extensive use of freelancing services.

While you may think a budget is hard to establish for a new business, it is essential to establish a healthy and sound financial foundation on which success can be built for the coming years.

About the Author: Roger Davies, is the Managing Director for Advanta Productions and is responsible for a web developer unit located in the Midlands serving businesses in the Nottingham, Derby and Loughborough areas. Advanta have worked on hundreds of web development projects. If your website needs development or if you want to sell on-line contact Roger on 0845 22 55 805 or via the website.

Well we got out our face painting kits and got our daughter ready for her school holiday party last week. It was on a Tuesday night and she was going to miss the holiday due to a planned trip to Europe, so this was her only chance to take part in Holiday festivities. She had great fun in the cafeteria eating cupcakes and sipping Sprite as all the kids laughed and spilled their plastic tumblers full of soda.

She’s been gone for less than a week but it seems like an eternity. I meant to get her a watch compass in case she get’s lost but having been placed on uncompensated leave I could not really afford to.

I’ve been at home playing around with my computer for the past month as I wait for the call from the office saying it’s time to come back. I have enough savings to hold out for a while but I must say after so much time one wonders whether there will be a job to go back to. All I can do, all any of us can do is wait.

At least I can take comfort in the fact that my daughter will be returning from Europe soon. The anguish one feels with missing one’s lov

e ones at times like these can be unbearable.