Calculations must be realistic and preferably estimate expenses to be too high rather than too low. This guide is associated with the Excel calculation programme Financial calculation. You can fill the Financial calculation with the help of this guide. On the left side of the calculation programme, there is a reference to the point in this guide. You will find advice, figures or calculation formulas to base your calculations on. With the help of the Financial calculation, you can calculate the profitability of your business.
The calculation program is xlsx -file and you can fill it with Microsoft Excel software (pay) or Libre Office Calc software (free). Do not use Google Sheets -spreadsheet program. This instructions is associated with the calculation programme Financial calculation. You can fill the Financial calculation with the help of these instructions. On the left side of the calculation programme, there is a reference to the point in this web page. You will find advice, figures or calculation formulas to base your calculations on. With the help of the Financial calculation, you can calculate the profitability of your business.
The calculation gives you answers to following questions
1) Where do you need money and how much, and where will you get the funding?
2) What are the costs of entrepreneurship?
3) How will sales be formed?
4) How will the money cover annual costs?
5) How much will the entrepreneur earn per year?
In Act 1, we calculated the needed financing. In this item, the programme calculates automatically the expenses of the financing.
In Finland, wage is paid for 2150 hours of work to the employee (8 work hours per day), although the real period of employment is approx. 1750 hours. Similarly, a person working 7,6 hours per day gets a wage of 2015 hours. Remember to include the wage paid to owners. It is wise to pay it due to a capital transaction tax in all company forms except companies with a corporate name, where wage payment is not possible.
Social security payments are 30 % of an employee’s gross wage with natural benefits, and in the accident-prone branch even 35 %. In case of illness, KELA (National Pensions Institute) does not cover all expenses and therefore it is recommended to calculate the social security payment at 50%. An entrepreneur in a corporation (Ltd., owns over 30 % of the company) pays an entrepreneur’s pension from his wage income, so extra payments of personnel will be 3 %. On behalf of other co-owners, the company will pay payments of its wages as they are employees. In a Commandite Company and in a company with general partnership, all responsible business partners belong to YEL (Entrepreneur’s Pension Insurance). To be safe, calculate all wages according to 50 % of extra payments.
Finnish entrepreneurs (= has decision-making power in the firm) have to take the YEL (Entrepreneur’s Pension Insurance) according to your profession and wage, which you would receive for the same work as an employee. If you have worked before as an employee and now as an employer, you must calculate the pension expenses by multiplying 1,5 times the gross wage. If you work in an accident-prone branch (e.g. construction) choose the multiplier 1,7. If your wage income has been e.g. 25 000 Euros, the basis for the entrepreneur’s pension would be 31 000 Euros, because the pension is added to your wage. Remember the customers will finance your pension payments – you just pay it. A person starting a business for the first time has a 25 percent discount for four years time, but don’t take it into account in your calculation. An entrepreneur’s pension can be paid flexibly according to incomes and how much you want to pay.
You need at least liability and legal expenses insurance. If you need fire insurance, it is approximately 0,3 % of the replacement value of the fixed assets. There are not obligatory personal insurance for the entrepreneur except YEL–insurance (Entrepreneur’s Pension Insurance). But it is highly recommended to take the following insurances due to financial safety:
1. Working and leisure time accident insurance and occupational diseases due to work
- insurance fee 1,7 % of annual wage which is the basis for the YEL payment
2. Permanent disability insurance
3. Life insurance whose amount is the same as the company loan
Payments for items 2 and 3 are determined by age of the person. Below are a few examples of life insurance fees which are calculated for a 100 000 € insurance sum.
|Age||Life insurance||Insurance for permanent disability for work|
|25 y||185 €/year||85 €/year|
|30 y||200 €/year||145 €/year|
|35 y||220 €/year||430 €/year|
|40 y||260 €/year||730 €/year|
|45 y||340 €/year||730 €/year|
|50 y||500 €/year||1250 €/year|
Almost all insurance fees can be deducted as a business expense, when the beneficiary of the insurance is someone else than the company itself.
Employees' health care is compulsory in Finland and costs are approx. 250 €/worker.
Generally speaking, the best way to start a business is to acquire rental premises, unless you already have a suitable place. Location is important, therefore owning a premise in the wrong place doesn’t guarantee success. In the retail business, rental premises are common. Entrepreneurs want to keep a possibility to change place when necessary. Budget also for a 1-3 month deposit which the landlord requires. The deposit will be paid back at the end of the rental period. If a municipality is the landlord, ask if it is possible to have a compensation e.g. in connection with a purchase.
|Average prices for rents €/m², VAT 0%||Retail shop||Industrial||Offices|
|Big cities||10 - 40||5 - 10||10 - 25|
|Small cities and tows||6 - 14||3 - 7||7 - 12|
Costs of electricity, heating, water, costs and waste management (VAT. 0 %)
Depending on the premise, you might have to take an electrical connection. The fee depends on the size and location of the connection. In the zoned areas, the connection fee is 40 - 90 Euros/Ampere and in normal sparsely populated area the joint fee is 50 - 100 Euros/A. There will be also a connection fee of approx. 200 €. There are great differences in the prices depending on the supplier and the municipality you live in.
Examples how to calculate the electricity consumption costs:
There are different ways to rent equipment:
1) Can be rented traditionally without obligation to buy for a short time
2) Leasing rents 2-5 years period (you don’t own the purchased equipment after the payment period)
3) Partial payment financing, financing period max. 60 months (you own the purchased equipment from the beginning)
In cases 2) and 3) additional collateral is not needed.
Leasing financing means that you have to pay by cash 0 – 30 percent of the value of the purchase and the rest you pay in monthly instalments. The maximum pay-back period is 60 months. You can choose the amount of the final installment as a percentage of the total financing, max. 40 %. Usually after the payment period, the equipment is not yours, but you can also purchase the equipment from the leasing company. In leasing, the overall interest is approx. 5 %. Each month you can deduct the VAT included in the purchase.
Partial payment financing means that you have to pay by cash 20 - 40 percent of the value of the purchase and the rest you pay in monthly instalments (max. pay-back period is 60 months). You will get a return of the VAT you pay within 2 months.
Benefits of Leasing Rental
Expenses are easy to budget and also maintenance and repair are often included in the leasing agreement. VAT can be deducted every month. In a final accounts analysis, a company’s invested capital Interest is higher because invested capital is replaced with leasing. Money is not committed to purchasing equipment, capital is available to use in the business.
Office costs include office supplies and equipment. Office machines can be deducted as a small-scale acquisition. The highest sum for these is 2500 € VAT 0 %. In this way, a single purchase can be at most 850 € VAT 0 %. Also personal computers etc. are included in this category in spite of the price.
The tools discussed here mean tools whose operating life is under 3 years, like hand tools, office work equipment and so on. The tax authority approves deductions once also machinery purchases 850 Euros/piece VAT 0 %, which total amount won’t exceed 2 500 € per year. Tools and work clothes are a part of a company’s image and must be updated.
Travelling expenses connected to business travel can be deducted, i.e. expenses due to visiting an exhibition. It is good to remember tax free kilometre allowance when using your own car and also daily expense allowances. Practitioners and entrepreneurs are not allowed to pay kilometre and daily expense allowances to themselves in cash. Those must be marked as a travelling expense allowance on a personal tax declaration.
Owners of commandite companies, general partnerships or corporation companies (Ltd) travelling expenses are paid in cash. Because the tax authority is interested in tax free payments to owners of companies, travelling-expenses accounts or a driver’s log must be carefully documented and delivered to a bookkeeper. There are also other expenses due to travelling; accommodation, bus tickets, plane tickets, etc.
Refund for Transportation costs in year 2022:
The costs of marketing depend on the business. At the lower end, marketing costs consist of business cards and logo costs.
Advertising in newspapers (+ VAT)
Advertising on radio (+ VAT)
Advertising on television and internet (+ VAT)
Bookkeeping offices collect from 700 - 2000 €/year. If there is a folder full of bookkeeping receipts fees each month, the fee may be 400 - 500 €/month. If your company is commandite company, general partnership or corporation company (Ltd), it is good to add costs of auditing accounts 200 - 500 €/year.
A new entrepreneur should increase his/her expertise and knowledge of entrepreneurship. The Employment and Economic Development Centre organises many different kinds of trainings each year. Attendance fees are reasonable due to public financial aid.In order to keep up your expertise in your field, you should order professional journals. You might also need to order newspapers and magazines for your customers or your own knowledge acquisition. However, your daily newspaper is worth changing to company’s expense.
A challenge when starting a business is the lack of credit information, so e.g. telephone connections can’t be opened.
The company needs a liability- legal insurance. The insurance costs are in retail business 400 - 1000 €/year and in industrial business 1000 - 2000 €/year.
Lisence to play music
There is a fee for playing music in business premises in Finland. According to law, if you play recorded music in your premises or in your switchboard (e.g. from radio, television, computer, etc.), you must pay a royalty fee via Gramex (record company) and Teosto (artists). More details: www.musiikkiluvat.fi
Shops 556 €/year (premises size 150 m²)
Yleisradio tax (YLE tax)
Limited liability companies, cooperatives, associations and foundations which taxable income is more than 50 000 euros are obligated to pay the YLE tax. General partnerships, limited companies and housing cooperatives are not obligated to pay YLE tax. Taxable amount is at minimum 140 € and at maximum 3000 €, and it is counted 140 euros + 0,35 % from the amount that exceeds taxable income 50 000 euros.
Office supplies and machines, mileage under three years, regardless of purchase price.
Business Costs (Total Fixed Expenses)