Being an independent contractor is no easy task. There are no paid-time-off days to use and any vacation or break you take directly affects your income. The holiday months can be the busiest time of the year depending on the industry you work in – and while this is great for business – it can also be very stressful. It is critical that you are organized and prepared for the many challenges you are bound to face. Here are some tips to help you get through this year:
1. Receive payments on time.
Any independent contractor knows that requesting and receiving payments from clients in a timely manner can be a tiresome process. This is especially the case during the holiday season. Clients frequently make late payments and sometimes lose track of invoices. Thankfully there are ways to avoid late payments and having to frequently remind your clients that payment is due.
- Ask for advanced payments. Receiving money upfront allows for more financial security and eliminates having to chase down clients who are late to pay.
- Keep billing cycles short. Stick to weekly and monthly billing cycles and avoid quarterly or annual cycles.
- Give early payment incentives. Offer your clients a discount if they pay promptly.
2. Track your expenses.
As an independent contractor, personal and work-related expenses are easy to mix up. It is very important to keep track of ALL of your expenses for several reasons. You will need a record of your purchases to take advantage of tax write-offs, provide detailed invoices to your clients, and analyze how you spend your money and what you can change to spend more efficiently.
One very simple solution is to digitally track your expenses. Itemize allows you to take photos of your receipts instead of holding on to the physical copies. The information from the receipt gets extracted and the picture of the receipt is stored on your phone and computer as well. Additionally, the app automatically processes digital receipts you receive by email. Using new technology like this can help you keep all of your expenses in one place and not risk losing important paper receipts.
3. Take advantage of tax saving opportunities.
One of the biggest perks of being self-employed is the many tax write-offs you are eligible for. Make sure to understand what you can and can’t write off as a business related expense. Here are some examples of ways to save money on taxes as an independent contractor:
- Set up a home office. You can deduct portions of your rent, utilities, insurance, and repairs among many other things.
- Hire family members. If you employ your child you can deduct their wages on Schedule C. Additionally, children under 18 are exempt from Social Security tax.
- Deduct your mileage. You are eligible to deduct your mileage driving to and from your home office to a client. Parking and tolls are deductible as well.
4. Offer promotions to boost business.
If you recently started your independent business you are most likely looking for new clients. Offering promotions and discounts can be a great strategy to attract them. Even if your profit margin takes a hit from this in the short-term, once you reel clients in they are more likely to come back and recommend your services to others. For example, offer a 25% discount for the month of December. It won’t take you long to make up for the lost income in the months that follow, and your client base will grow exponentially. Stay conscious of the grand scheme of your business and don’t focus on making immediate, short-term profits. Longevity is the key to success.
5. Be as transparent as possible with your clients.
People appreciate transparency when hiring independent contractors. It is easy to over-bill hours, make miscellaneous charges, and recommend unnecessary services to uninformed clients. These bad practices will come back to bite you in the long-run. It is important that your clients trust you completely and do not feel that they are being taken advantage of. People appreciate the small things. Here are some things you can do that your clients will greatly appreciate and will also make you standout from your competition:
- Provide receipts for additional charges you bill to your clients (see Itemize).
- Outline exactly how you used the hours you bill, step by step. Let the clients understand your work.
- If you have any dissatisfied clients, make sure to offer a make-good free of charge. You don’t want to leave a bad taste in any of your clients’ mouths. Again, think about the longevity of your business – don’t be shortsighted.