3 Financial Mistakes Too Many Contractors Are Making

Take it from a professional blogger, contractors and freelancers can be an odd bunch! While more conventional entrepreneurs generally have a rich history of experience in managerial positions, and an intimate understanding of what makes a business tick, a lot of contractors and freelancers simply start with a skill, and a drive to succeed. While this can get you some of the way towards success, you’re going to run into some massive problems if you make these common financial mistakes…

First of all, being too blasé about the accuracy of the financial information that you’re getting. Talk to any accountant specializing in contractors, and they’ll have had countless times where they’ve gone through a contractor’s books and statements, and had to mark various figures which weren’t correct. They’ve probably also had a lot of clients that knew there were discrepancies, but thought they were in the right area and took that as an excuse not to worry about it. If there’s one thing in your financial records which you certainly should be worrying about, then it’s inaccuracies in your books! This kind of slip-up can stem from a number of different areas. Your take-home expenses may not match your revenue figures, and depreciation expenses may not be entered often enough. Revenue, materials and direct labour can also slip through the net.

Next, taking care of every little facet of your finances yourself. While this is certainly understandable, it’s not something I can condone if you want your books to remain as consistent and manageable as possible. You have an entrepreneur’s mindset, and as such you’ll probably want to stay as independent as possible in everything to do with your business. However, an extra pair of eyes can be extremely useful for lot of things, and managing your finances is certainly one of them. If you don’t run everything through an accountant, you could end up missing out on some very substantial tax-deductible expenses, or even worse unknowingly commit a crime! Look for some firms such as Taxup accountants, and find a service that will help you steer clear of these mishaps.

Finally, failing to compare your current financials to your previous budgets and periods. It may be time to take out your latest financial spreadsheet and consider whether or not it has enough columns. If you don’t have a ‘percentage of sales’ column, a prior-year comparison or a comparison to budget, then you’re never going to have financial records that are quite what they should be. Although the present is obviously the most pressing issue or your business, a keen understanding of your past business is integral for success in the near future! You need to be able to see whether your business is getting better or worse, and the causes behind this trend. Are your sales going up or down compared to previous years? Are your overhead expenses fluctuating often? These are the kinds of questions you need to be asking to get a good handle on your business’s finances; past, present and future.