Financial calculations
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.
With These Instructions You Can Fill Financial Calculations
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?
3.2 Instalment of a Loan and Interests
In Act 1, we calculated the needed financing. In this item, the programme calculates automatically the expenses of the financing.
3.5 Wages and Salaries
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.
3.6 Entrepreneur’s Pension Insurance
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.
3.7 Other Indirect Employee Cost
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
Costs of life insurance and insurance for permanent disability for work
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 per year | €85 per year |
| 30 y | €200 per year | €145 per year |
| 35 y | €220 per year | €430 per year |
| 40 y | €260 per year | €730 per year |
| 45 y | €340 per year | €730 per year |
| 50 y | €500 per year | €1250 per 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.
3.8 Other Staff Costs
Employees' health care is compulsory in Finland and costs are approx. 250 €/worker.
3.9 Rent of Business Premises
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 € per 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 |
Operating Costs of The Business Premises
Costs of electricity, heating, water, costs and waste management (VAT. 0 %)
- The total price of general electric costs inclusive energy- and transfer payments is app. €0,20 per kWh. You can calculate the electric consumption with the following formula; power of electric devices (kWh) x useable hours x €0,20.
- The annual cost of heating is app. €15-30 per m2 per year. High ceilings raise heating expenses by 20 – 30 %.
- In light industry, offices and shops water consumption is app. 25 litres /person/day, that is €35 per person per year.
- Collection mixed waste costs app. 20 € /collection/600-660 litre container and app. 10 €/collection/300-360 litre container. Collection bio waste costs app. 12 €/collection/140-240 litre container.
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 per Ampere and in normal sparsely populated area the joint fee is €50 - 100 per Ampere. 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.
Example how to calculate the electricity consumption costs:
- Machine 3000 W, use 5 h/day and 210 days: 3 kW x €0,20 per kWh x 5 h x 210 days= €630 per year
3.10 Rental of Equipment, Leasing and Partial Payment Installments
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.
3.11 Cost of Vehicles
Cost of operating vehicles in business use.
3.12 Costs of ADP-equipment and -programs
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.
3.13 Costs of Other Machinery and Equipment
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 per piece VAT 0 %, which total amount won’t exceed €2500 per year. Tools and work clothes are a part of a company’s image and must be updated.
3.15 Travelling Expenses
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 2023:
- Kilometre allowance when using own car is €0,53 per km
- Daily allowance is €48, with following terms: the trip lasts over 10 hours and is over 15 km from the starting point and also over 5 km from home
- Half-day allowance is €22, with following terms: the trip lasts over 6 hours and is over 15 km from the starting point and also over 5 km from home
3.17 Marketing
The costs of marketing depend on the business. At the lower end, marketing costs consist of business cards and logo costs.
- Printing a business card costs app. €50 - 300 + VAT.
- Designing a business logo and forms costs aprx. €300 - 400 + VAT.
- Websites costs €300 – 2000.
- Neon lights. It is possible to buy them used although you need to add new text. The minimum cost is €500 + VAT. A new large neon light (5 m2) costs €1500-2000 + VAT.
- Decals (for van, window) costs aprx. €50 per m2 + assembly costs are €45 - 50 per hour. Planning may also cost.
- Remember to budget also for printed advertisements in different media.
Advertising in newspapers (+ VAT)
- Subscription local newspaper and free regularly published newspaper: aprx. €1,0 – 2,5 per column millimeter.
- Provincial newspaper: aprx. €1,8 – 6,0 per column millimeter. Higher prices on Sundays.
- When advertising it is useful to repeat the advert more than once. If you repeat the advert 2-4 times discount is 20 % and more than 10 times the discount is 30-50 %. It is profitable to have a negotiation with prices.
Advertising on radio (+ VAT)
- National commercial radios: aprx. €150 - 500 per 30 seconds. Advertisement is separately ordered and costs start at 200 €.
- Small local radios: price aprx. €16 - 60 per 30 seconds and usually advertisement is done at the same price.
Advertising on television and internet (+ VAT)
- TV – advertising: Price varies greatly depending on time, region and number of showings. Regional prices are aprx. €60 - 5 500 per show and national prices are aprx. €800 - 12 500 per show. Production costs are from €1500.
- Search word advertising in internet (e.g. Google): based on “click pricing” (CPC) in other words you pay only when your link is clicked. The price varies from 0,10 - 10 €/click. You can limit the costs by settling a boundary
how many clicks can be connected to your link. - Web -Banner advertising (CPI): Cost per impression, term used in online advertising and marketing related to web traffic. Example of the costs: ”Banner 300 x 600px” in the one of the popular web pages Iltalehti costs are €23 per 1000 impression.
3.19 Administrative Services
Costs of bookkeeping, payroll, financial statement, business tax return
All companies must keep accounts of their business. The company’s management is responsible for the proper management of accounting.
| Bookkeeping receipts | Prices per year |
|---|---|
| 1 - 30 pcs per month | €400 - 700 |
| 30 - 100 pcs per month | €1000 - 2150 |
| 100 - 200 pcs per month | €2000 - 4000 |
| 200 - 500 pcs per month | €4000 - 8000 |
Payroll
Payroll €10 - 15 per pcs
The Financial Statements
Sole trader €150 - 180
General partnership €180 - 200
Corporation company €250 - 350
The Business Tax Return
Sole trader €120
General partnership €190
Corporation company €200
Audit Cost
If you are a private trader, your company does not have to perform an audit.
If your company is commandite company, general partnership or corporation company (Ltd), it is good to add costs of auditing accounts €500 - 2000 per year.
The audit is mandatory if you have a limited liability company, a limited partnership, a general partnership or a cooperative, and if your company meets two of the following conditions during the concluded financial year and the financial year before that:
- your company’s turnover is over €200,000
- your company’s balance sheet total is over €100,000
- your company employs over three people on average
3.20 Knowledge Acquisition
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.
3.21 Costs of Communication and Monetary Transactions
Telephone operator may require €300-500 worth of deposit or security payment to guarantee the payments under the agreement.
- Internet connection fee is aprx. €360 per year VAT 0 %.
- Payment terminals cost from €400 or aprx. €15,90 per month. Use of a payment terminal costs aprx. €4 per month, the annual fee is approx. €85, and there is a fee of 0,031 % per payment, however the minimum payment is €0,04 and max. €0,75 per payment.
- Counting cash in the bank costs aprx. €3 - 7. Fees vary between banks.
3.22 Insurance Premiums
The company needs a liability- legal insurance. The insurance costs are in retail business €400 - 1000 per year and in industrial business €1000 - 2000 per year.
Other Expenses
- Employees’ health care is compulsory in Finland and costs are aprx. €250 per worker.
- Parking fees, representation expenses, meeting costs and cost of establishing a business.
- Federation of Finnish Enterprises membership fee is aprx. €160 per single membership
- Unemployment Funds for Entrepreneurs example annual income €30 000, annual fee €510 per year. More info: Entrepreneur Fund.
Lisence to play background music
There is a fee for playing backround 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
Example background music copyright costs
- Hairdresser and beauty salon €253 per year (premises size 30 m²)
- Shops €443 per year (premises size 100 m²)
- Restaurant and cafe €575 per year (50 customer seats)
- Restaurant and cafe €1038 per year (100 customer seats)
- Lunch restaurant €726 per year (100 customer seats)
- Gym €1000 per year (premises size 500 m²)
- Taxi €84 per year
Yleisradio tax (YLE tax)
Limited liability companies, cooperatives, associations and foundations which taxable income is more than €50 000 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 + 0,35 % from the amount that exceeds taxable income €50 000.
3.23 Office Supplies
Office supplies and machines, mileage under three years, regardless of purchase price.
3.24 Other Costs
Business meeting and confrence expenses with suppliers, customers, staff. Research expenses and other deductible expenses.
3.25 Company Vehicle Costs for Privat Use
All company vehicle expenses are included for example: leasing costs, services, fuel/electric, tyres, insurances. VAT is not deducted from them.
3.26 Handling Fees of The Trade Register
Price list for notifications to the Finnish Trade Register:
- Starting up a limited liability company through a guided process in the online service at ytj: €240
- Start-up notification for limited liability companies: €320 online / €380 paper
- Start-up notification for private traders: €60 online / €115 paper
- Start-up notification for general or limited partnerships €240
Business Costs (Total Fixed Expenses)
These expenses don’t depend on sales, but it is possible to change them when sales grow. “Needed working capital per month” reveals the sum which must be considered when calculating the need for money. It is better to be prepared to double the sum.
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