As contractor accountants, we have helped countless clients who are new to contracting ensure that they are on track for a successful financial start.
That said, we have also witnessed many new freelancers make common, easy to avoid mistakes. Here is a list of our top three that you can easily avoid.
1. You’ve calculated your rate incorrectly and undervalued your time
When you are just starting out, it can be easy to undervalue your time. If you simply calculate your former salary, determine what you used to be paid per hour and quote your clients this rate, you are not taking a freelancer’s overhead into account. As your own business, you need to generate leads, build a brand and also pay for all of your brick and mortar expenses. If this includes employees, that amount will be hefty. A simple formula? Double your previous hourly rate for a comfortable amount of room to pay your expenses.
2. You’re treating your revenue like profit.
As a paid employee, you probably got used to spending the money in your account on your personal needs and wants – after all, this money was your pay for services rendered and was yours to spend at will. As a freelancer or contractor, this changes dramatically. You must calculate and set aside your own taxes, your employees’ wages, your business expenses and account for lean months ahead.
3. You’re not delegating enough.
You know you’re good at what you do, and you know you can earn a lot of money for the services you provide. But are you doing too many of the wrong kinds of tasks? As a freelancer or contractor, it can be tempting to do your own billing, bookkeeping and even cleaning in order to ‘save money,’ when in reality these tasks are keeping you from your true business. Delegate these specialist tasks and you will have more time to focus on your own specialty and your work/life balance.
Do you want an Accountant who understands just what it takes to be a freelancer?
If you have been treating revenue like profit and want to know what about the consequences you could face, get in touch to speak to one of our experts.
