Pete Norris Business Lecture 5 / Economics

Today we began by discussing, every profession has its own tax exempt elements. Whatever equipment or facility you may be using has a cost and are all costs to do the job. When we start earning money, there are ways you can start to reduce your cost on what you are spending for the equipment and facilities. This is important to get an understanding of your costs, especially as a freelancer. Make sure that you get your costs right.

Finance is all about the control and flow of money. Its knowing where it goes, where it goes to, how its noted and more. Money has several definitions. First of all, it is the cash you have, it is short tern and is very fluid. Then there is the cash you have + the cash that you can get, the availability of money to an individual, e.g savings. Next there is the cash you have, the gash you can get + loan credit, this is less fluid and you have to pay back the money that you have borrowed. Finally there is loan credit. This is short term and long term, for example a mortgage or my student loan, with 25 -35 years of debt and small amounts of money flowing out to recover that debt. It was interesting to learn, if you are owning a firm and your going to run it, short term loan credit is what your after. Banks offer loan credit to agencies on a short term basis, about a years worth. So if an agency is running a project, people need to know when am I going to get paid and how quickly can they expect payment. It is usually around 30-60 days for the short term loan to take effect and enables the agency to pay their workers.

Next we learnt some basics about finance, cost and price. Cost is what you have to give to get something you want, it is not necessarily financial. It is normally described as a monetary aspect but there are always more difficult things you have to cost. This could be simply being polite to a client, even if you may not like them. Next there is price, what an item is actually sold for. Fashion items for example, cost little to make, but are sold for a high price. So if this client expects a high price, charge them. If the client says this job is going to cost £1000, charge around £1000 if that is what the client is expecting, when it's only going to cost them £100 to make the product. If you only charge £150, with £50 profit. The client may think, there is something wrong here, Im not going to get what I expect and wont buy from you. So it is important as a designer to be aware of what the market expects. As long as you can deliver the quality there is no problem and then charge appropriately.

After we covered more key pointers in finance. Profits are the difference between cost and price. Price above cost leads to better income. However, loss is is the negative difference between cost and price, with prices sitting lower than costs. Then we looked at Income, Income is money coming in, this can be cash or credit. You need to understand what your income is, because based on your income helps decide whether a bank will give you a loan or not. on the other hand, there is expenditure. This is the spending of money and the money that is going to leave. Next we looked at debt. Debt is the money that is owed to you or the money that you owe. This is connected to expenditure in a way. You have to know what money is leaving as you also have to pay the workers in the business, if you accumulate debt you cant pay these workers and they stop working and the whole plot falls apart. Finally there is credit. Credit is how much money beyond that which you have, you may use, this is often a positive element in business. I have learnt a lot from this business lecture yet again and I have learnt how important it is to plan your flow of money in the world of industry.