The number of Contractors has increased in recent years and in an ever-evolving and dynamic job market, they add significant flexibility to the workforce. By working on a project basis, Contractors make their specialist skill sets easily available to businesses across a huge range of industries.
There are many benefits of being a Contractor including the earning potential, autonomy and a high degree of flexibility in terms of the hours you work and the work you do. On the flipside, the nature of this type of work means that Contractors also face some unique challenges that people in traditional employment don’t have to deal with.
In this post we explore some of the main challenges Contractors can face and how working with a specialist Contractor Accountant can both help you overcome these challenges, and also help your business to flourish.
Operating Structure
Challenge: A key decision that all Contractors face is choosing the right operating structure for their company. Generally, Contractors will either operate through a limited company or personal ownership as a sole trader. There are various implications for both structures including tax, accounting and reporting obligations and personal liability.
Contractor Accountant’s Role: A Contractor Accountant can provide expert support and guidance on the best operating structure for you based on various factors including your specific circumstances, turnover and business goals. They will also be able to incorporate your business if you decide to go limited.
Growing Your Business
Challenge: All Contractors want to grow their businesses but may need financial advice and guidance to help scale up their operations.
Contractor Accountant’s Role: The advice and guidance of a Contractor Accountant will help to lay strong foundations for growth by getting your business onto a solid financial footing. The financial optimisation they provide plays a key role in driving growth and they will help to increase profitability over time which means more money to invest back into your business or marketing activities.
A Contractor Accountant can also assist with forecasting and budgeting which helps to plan for structured growth over time and they can play a key role in helping you secure funding or investment to take your business to the next level.
Time Pressure
Challenge: Contractors can be extremely busy with multiple contracts in progress and deadlines to meet. As a self-employed person, you also have other responsibilities such as marketing your business and winning new work. Getting bogged down with tax returns, record keeping and admin tasks can make a significant dent in your time which could be better spent on core business activities.
Contractor Accountant’s Role: Working with an accountant significantly reduces the admin burden on Contractors. Laborious and time-consuming tasks such as preparing and submitting your self-assessment tax returns and quarterly VAT returns will be handled for you. They will also be able to help with corporation tax returns and payroll if applicable, as well as giving advice and guidance on more efficient ways of working.
Accounting software such as FreeAgent, which is included free of charge for all Gorilla Accounting clients, can play a significant role in easing the time pressure on Contractors. The in-built automation in FreeAgent can save heaps time and logging expenses on the go is simple with the mobile app.
Accurate Record Keeping
Challenge: Accurate record keeping is the foundation of good accounting but maintaining detailed and organised records of invoices, expenses and income can be a laborious and time-consuming task.
Contractor Accountant’s Role: A Contractor Accountant will provide help and guidance on how to organise your financial transactions and accurately track all income and expenditure, as well as the most efficient ways to do this. Accounting software such as FreeAgent can play a big role in keeping your records accurate and organised.
The benefits of accurate record keeping are wide-ranging and include contributing towards accurate reporting, tax compliance, effective cost control and better management of your cash flow. This all equates to improved financial management which can only be a good thing for you and your business.
Tax Compliance and Planning
Challenge: Tax regulation and legislation is complex and ever-changing. Contractors must stay abreast of the changes to ensure they are compliant and don’t attract unwanted attention from HMRC and the potential investigations and penalties that could ensue.
Contractor Accountant’s Role: A Contractor Accountant will help ensure that your records are accurate and that your tax returns are submitted correctly, on time and are compliant with any changes in tax legislation and regulation. They monitor all regulatory changes so you don’t have to!
They will also assist with tax planning and optimisation to minimise your overall liability, maximise your deductions and give holistic guidance on tax-efficient practices for your business.
Maximising Allowable Expenses
Challenge: Maximising allowable expenses can have a huge impact on tax-efficiency and profitability, but it’s not easy for Contractors to identify all allowable expenses and claim them.
Contractor Accountant’s Role: A Contractor Accountant will help with categorising and tracking your expenses. They’ll review all business expenditures and they’ll be able to easily identify all eligible deductions.
Financial Management
Challenge: The overall financial management of a business can be complex and multi-faceted and is something that can be difficult for contractors, especially when day to day business activity must be handled as well.
Contractor Accountant’s Role: A Contractor Accountant will provide valuable support and advice to ensure effective, accurate and efficient overall financial management of your business. This can include best practices in terms of record keeping, managing cash flow, optimising your expenses and budgeting and forecasting.
Fluctuating Income
Challenge: Due to the nature of project-based work, Contractors can experience fluctuations in their income. Seasonal variation can also have an impact. This can make it difficult for Contractors to manage their finances both from a business and personal perspective when they are going through a lean spell.
Contractor Accountant’s Role: A Contractor Accountant can help Contractors navigate income fluctuations by identifying trends and periods when there might be a cash flow shortfall and create a flexible budget that accounts for income variation. Other guidance that they provide includes increasing tax-efficiency and maximising allowable expenses which will get your business in a stronger financial position. This financial resilience will better position your business to cope if and when income drops.
The Benefits of a Contractor Accountant
The financial challenges faced by Contractors are numerous but appointing a Contractor Accountant can massively ease the pressure. Your tax affairs will be expertly handled and you’ll receive wide-ranging support, advice and guidance to optimise your business finances and strategically plan ahead.
Having a Contractor Accountant in your corner also means you don’t have to worry! You have peace of mind knowing that your financial and tax affairs are in good hands allowing you to run your business with less distractions and fully focus on core activities and business growth.
For a fixed fee of just £110 + VAT per month, all your Contractor Accounting needs will be covered with our Limited Company Contractor Accountancy Package. If you have any queries about our service, please call 0330 024 0406 or request a call back today.
