Posts Tagged ‘Budgeting’
Saturday, May 15th, 2010
- Save money – You will only pay for the time they work. If your business is not large enough for a full time employee, a contractor could be a smart move. Contractors can be highly experienced individuals who are looking for variety in their work routines which allows them to have several projects for different companies at a time. With independent contractors a business does not have to pay the employers portion of taxes; however an independent contract will probably cost more per hour than an employee because these extra costs will be built into their rates. So what you are really saving is the payroll function hassles.
- No health benefits – As we all know in is day and age health care is expensive. Being able to split the cost with other companies is very attractive. Average health care cost per employee is $7,000 and up. We all know how this can affect a growing business.
- Flexibility – As you grow extra help may not be required all of the time. A large project that lasts six months would necessitate the business owner hire an employee for a short period then go through the lay off process. This process can take an emotional toll on the entrepreneur as well as the employee.
- Efficiency – Because independent contractors are usually specialists, they require very little supervision and training time is virtually nonexistent, they can usually start working on a project right away.
Tags: Budgeting, contract worker, employee, employees, hire, independant contractor, management
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Monday, April 5th, 2010
Now that you have a budget, review it on a regular basis. As the year goes along start another version of your budget. Replace the estimates with the actual results of your work. Most owners tend to manage spending and overestimate earnings. Use your budget instead, it is a powerful tool and will give you good information on whether or not you are on track.
If you feed your budget with real number it will give you an instant view of your progress. Most of the CEO’s of the world are doing exactly that. Of course financial aspects are important, but they cannot replace your vision. However, your budget can bring you back to earth if your visions are too elaborate.
Tags: balance, Budgeting, business, business finances, Business Resolution, company vision, management, small business, Well planned budget.
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Monday, March 29th, 2010
Now it’s time to budget for the costs that happen now and then within your company. Are you planning something different this year that you have not tried in the past? For example:
- Are you planning on an intensive marketing campaign to go with the increased sale you have budgeted?
- Are you planning on purchasing new equipment this year? If so the depreciation will be an adjustment to your costs.
- If you have budgeted increased revenue for the year, will you need more office staff? Will you need a bigger sales force?
- With increases in employees also comes an increase in consumables like office supplies, gasoline for the delivery vehicles, cell phones, and yes even more coffee for the break room.
- An easy way to estimate these types of costs is to take the cost in each category from last year and divide by the number of employees. Now take the amount spent on each employee and multiply by the amount of total employee budgeted for this year. Once you have this number you can tweak the numbers to keep your margin in line with your projections.
Tags: balance, Budgeting, business, business finances, Business Resolution, company vision, goals, small business, Well planned budget., work smarter
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Monday, March 22nd, 2010
The next step in the budgeting processes is to estimate the operating costs of the company. Let’s start with the costs that are recurring. You should already know or have a good idea what these costs are.
- These are the cost that you would pay, no matter the amount of business you have.
- Look through your check register and credit card statements.
- Another good place to refresh your memory is to refer to the invoices from the previous year.
- Look for items like subscriptions, office rent, utilities, and office staff wages to name a few.
- Now distribute the costs based on the time span you have chosen for your budget.
Tags: Budgeting, business finances, Business Resolution, company vision, goals, small business, Well planned budget., work smarter
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Monday, March 15th, 2010
The requirements for budgeting projects are a lot like budgeting for production except on a grander scale. Plus the process is in reverse order, costs must be calculated first, then sales price.
- Estimates are made and contracts are signed long before any activity is seen on a project. The revenue for a project based business is set before any concrete costs are known. Because of the switch, budgeting cost of goods sold is extremely important.
- Determining how much a project will cost is similar to that of products. Materials for the project will need to be shopped, labor hours calculated, addition of subcontractors also will add into the mix.
- Budgeting for projects can become extremely complicated. If the owner of a project based company is not proficient in estimating, it is imperative that a seasoned estimator is on staff or can be hired on consulting basis.
- After the estimate is finished and the contract signed your gross profit is revenue less cost of goods sold.
Tags: Budgeting, business, business finances, Business Resolution, company vision, goals, organized, Well planned budget.
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Monday, March 1st, 2010
Budgeting gross profit for retail is probably the least completed of any industry, but still extremely important.
- As with the production industries, companies that resell tangible items must know what price the market will bear for their products. Determining a sales price can be any method, from an in depth market study, to a simple exercise in shopping your competitors.
- Next you will need to know how many of your products you will be able to sell in each of the next twelve months. Again what the market will bear.
- If your company is in resale, your cost of goods sold is the price you can obtain inventory, plus any carrying costs. Carrying costs can be interest to finance the inventory, the warehouse to hold the inventory and freight to transport the products to the warehouse.
- To determine revenue take the number of units you will be able to sell each month times the market price you have determined.
- For the cost of goods sold the calculation is the number of units sold each month times the cost to product one unit.
- Now subtract the monthly cost of goods sold from the monthly revenue to obtain the gross profit.
Tags: Budgeting, business finances, Business Resolution, company vision, goals, small business, Well planned budget., work smarter
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Monday, March 1st, 2010
Budgeting gross profit for products, services, retail or projects each have different requirements. Let’s start with services this week.
- In the service industry your time and your employees’ time is what’s for sale. Once you know what the market will bear for your services you can attach a billable rate to yourself and each employee.
- Next you will need to know how many hours are available to bill out. When calculating this number consider things like travel time, company meeting time and any other functions that might need to be performed by yourself or employees that cannot be charged to your customers.
- Now that you have total billable hours and rates for yourself and employees put the two together for each month. This will be your total gross revenue on a monthly basis.
- Cost of Sales is the next component of gross profit. How much will you pay each person? You can incorporate payroll taxes and benefits in this number or these costs can be included with overhead. I would suggest that you follow what is typical in your industry. You can find industry information at Free Industry Reports, or for more in depth information Prime Industry Reports.
- To finish calculating your gross profit, subtract the monthly cost of sales from the monthly total revenue.
Tags: Budgeting, business finances, Business Resolution, company vision, goals, small business, Well planned budget., work smarter
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Tuesday, February 9th, 2010
What are the tools you need to create a budget? Most would think a crystal ball. How else would anyone know the future? This is where most that fear budgets go wrong. Why? My guess is that most small business owners don’t really understand budgets. So what is a budget? A budget is not a prediction of the future, but instead an estimate, or best guess, of what will be. A budget is your business plan written in the language of dollars and cents or a road map that points you in the direction of achieving your goals, for a month, a year or beyond.
If your Business New Year’s Resolution has mention of finances, then a budget would be the second step after creating The Elusive Company Vision. It is always nice to know where you want to go, but how to get there is the majority of the battle. Don’t misunderstand that because budgeting is such an important task it must also be an overwhelming one. Any owner who “knows” their business can put together a well planned, realistic budget. Over the coming weeks we will do just that, step-by-step create a working road map toward your vision.
Tags: Budgeting, business finances, Business Resolution, company vision, small business, Well planned budget.
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