You might think that managing your finances as a regular employee is easy, but that all changes when you become self-employed. If you’re working on a contractor basis, you’ll have to start adapting to fit the self-employed lifestyle. There are many things that you’ll need to know when it comes to this, but arguably the most important thing to consider is your finances. If you don’t manage them properly, you’ll get into all sorts of bother. Before long, you’ll be struggling for cash. Let’s look at a few ways to solve this problem.
Separate Your Finances
The first thing you’ll ideally want to think about is separating your finances. By this, I mean creating an extra account for your business-related finances away from your personal ones. The reason for doing this is to make it much easier for you to understand what’s coming in and what’s going out. You’ll be able to budget much better as a result, and you’ll also be able to see whether you’re making profits.
Get Help From The Professionals
Before we get on to anything else, I think it’s a good idea to bring this topic up! A lot of people who merge into the world of contracting aren’t very clued-up about accountancy. Unless they’ve worked in this area previously, it often seems overwhelming and confusing. That’s why it’s worth taking some of that money out of your account to hire an accountant. You might not need to do this if you’re working on a small scale, but when that changes, contractor accountants will prove invaluable.
If you’ve ever talked to anyone that is self-employed, they’ll tell you that tax returns are a nightmare. That is especially true if you’ve never done one before. They don’t come around all that often, but when they do, you’re going to have to know what you’re doing. Failing to complete them correctly could result in an extensive fine. Before the time comes, do plenty of research to figure out exactly what you need to know. Also, keep all records of all financial incomings and outgoings.
Invoices are fairly easy, but you may have never had to complete one before! This is the way that you’ll charge people for your services, so you’ll have to know what you’re doing if you want to make money! The best way to do this is to get a template off the internet that you can pick up for free. Then, make sure you’ve filled in all the relevant information and provided the correct details in order to be paid correctly. Keep a track of all invoices you’ve sent, as you can then send chase-up emails if you don’t get paid.
The life of a contractor isn’t always an easy one. There may be extended periods of time where you aren’t making very much money at all. Because of this, it’s always a good idea to try and save money when you’re doing well for yourself. Put it into an emergency fund, because you never just know if you’re going to need it tomorrow.