LUTZ BUSINESS INSIGHTS
5 Money Management Tips for Independent Contractors
BRANDI MCKAY, SENIOR ACCOUNTANT
It’s nice to get a steady paycheck; you know how much money is coming in, and when. However, when you became self-employed, You left that behind knowing that you’d probably face some financial unpredictability. But there are steps you can take to avoid being in a constant state of uncertainty. Here are five of them.
Keep your business and personal accounts separate
Let your business checking account “pay” your personal account; transfer income over when needed. You don’t want your home utility bill and grocery tab mixed in with your business insurance and office expenses. It makes it impossible to get a true reading of your company’s financial status.
Don’t cheat yourself when you’re pitching jobs
If you’re in a position to bid on work, don’t ask for less than you need. Undervaluing the skills you bring to a project will make some potential customers think that you can’t deliver the quality they need. Keep in mind that what you’re paid has to cover expenses like insurance, overhead, benefits, savings, and taxes.
Create dual budgets
Frustrating as they can be to create (and follow), budgets are a must for independent contractors. You’ll have clients who won’t pay when they’re supposed to, and you’ll have dry periods when your work is slow. Put together two separate budgets, one for your company’s needs and one for its wants. Dip into the latter only during those periods when work and money are rolling in.
Never have a low balance in your business savings account
Many experts recommend that you have at least six months’ worth of living expenses saved in case you get sick or injured; you lose an important client; or you’re not bringing in money for some other reason for more than a week or so. It’d be great if you could have set this aside before you became self-employed, but this may not have happened.
If that’s not possible, prepare yourself for down times in other ways:
- Consider getting a line of credit and only draw on it for emergencies.
- Keep your credit score in the upper ranges in case the worst happens and you have to actually take out a loan to keep going.
- Put together a business plan. You’ll need this if you request a loan, and it’s a good tool that can help keep you focused. It doesn’t have to be dozens of pages. You may even be able to condense it down to one page (minus any financial charts).
Let an expert step in
You should be focusing your time and energy on improving your company’s products or services and finding buyers for them – not wrestling with spreadsheets. We can assist you with basic bookkeeping, reports and taxes. Let’s connect and discuss the possibilities.
ABOUT THE AUTHOR
BRANDI MCKAY + SENIOR ACCOUNTANT
Brandi McKay is a Senior Accountant at Lutz with over six years of relevant experience. She provides outsourced accounting services to clients with a focus on the healthcare industry. McKay also assists the tax department.
AREAS OF FOCUS
- Client Accounting Services
- Healthcare Industry
AFFILIATIONS AND CREDENTIALS
- Nebraska Medical Group Management Association (MGMA), Member
- MPA, University of Nebraska, Lincoln, NE
- BSBA in Accounting, University of Nebraska, Lincoln, NE
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