Leo, KC

Did you know that cash flow deficiencies 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.Whether you run a simple work at home business doing admin tasks, or manage a national organisation such as my client Softcat who are Mimecast specialists, well managed finances and in particular a healthy business cash flow, are everything.

When starting a new business 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 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.

As is the way with all businesses at web design Nottingham we have the same two areas of business 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 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, insurance 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. 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 revenue. 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 sales.

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 new employees into the business.

While you may think a budget is impossible 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, The senior web developer Advanta Productions manages an e-commerce web design company at the centre of the Nottingham, Derby and Loughborough countryside and has overseen the team who have created hundreds of web site development projects. If you’re not sure how to get your website development started or want to advertise and sell on-line contact Advanta on 0845 22 55 805 or visit the website.

If there’s anything we’ve learned in recent months, it is that we should be energy smart whenever possible. Conserving energy in our homes and driving is very worthwhile. Even though oil prices have come down to half of their peak in mid-2008, we know that they could go up again in a hurry.

I drive a large Yukon XL, which is basically a Suburban. Mileage is not so good, but I’ve cut back to making three trips to the office weekly whenever possible. That has helped my fuel budget. I would get a smaller car, but this baby is pretty useful for carrying loads and large groups of people on a trip.

Several years ago we put in extra insulation in our home, and we use a whole house fan to reduce the amount of air conditioning we use. When we hear so much energy talk on the news, it does have the effect of getting us to at least think about ways to cut back on energy usage.

Talk about a waste of energy—the fuel spent on airplanes, helicopters and trucks in fighting wildfires in California is insane. Also, think about all the gasoline used by folks vacating their threatened homes. I found some discussion about wildfire prevention and other fire safety issues at the Minutemanfire site. It is amazing that homes could be destroyed even with tile roofs and a swath where the vegetation had been removed.

There’s a lot of wasted energy in the work involved in rebuilding homes demolished by wildfires. So there is a relationship between energy conservation and fire prevention, that we often don’t think much about.