Being an independent contractor has become popular in recent years. With the abundance of work-from-home jobs only continuing to grow, more and more people have found themselves freelancing as their primary source of income.
The flexibility of being an independent contractor draws many who choose this career path. Making your own hours and essentially being your own boss is enticing. However, there’s more to this job than meets the eye.
Since you are a business owner in some form, you must ensure you’re following sound business practices. Managing money, preparing for tax season, and even purchasing cybersecurity insurance to ensure your computer stays protected are just some of the essential aspects of being an independent contractor.
Manage Your Money Properly to Cover Dry Spells
Independent contractors are not able to count on a specific income each month compared to salaried or hourly employees. Most business owners know there will always be months when money isn’t coming in as heavily. Many call this a dry spell due to the lack of income flowing.
As a freelancer, dry spells often happen when your work isn’t selling. It doesn’t necessarily mean you have done anything wrong, but people may not be in the market for your services as heavily as months prior.
Even if you’re not generating as much income during these months, your bills and expenses will remain the same. For this reason, properly managing your money during the months you see extra income is essential.
Having extra money to cover your expenses during dry spells will ensure all your bills are covered, and you can continue living comfortably.
Have Accountability for Your Tasks
Being an independent contractor often means you don’t technically need to answer to anyone. However, your clients are, in a sense, your bosses. They are providing you with work and creating a deadline for when it needs to be done.
While you don’t have to work specific hours to complete your tasks, finishing them is still crucial by the provided deadline. If you are late on your work, clients may feel you are untrustworthy and choose not to work with you again. They may also inform others in the same business as them that your services are unreliable.
Without new clients coming in, there is no income flow. So, it’s essential to hold yourself accountable for your tasks. It can be easy to fall into the trap of telling yourself you’ll complete a job later, only to never get around to it.
Creating a schedule for your work can help you stay on top of jobs and complete them with plenty of time to spare. Your schedule doesn’t have to look the same each day either — that’s part of the joy of being a freelancer. Choose days and times that work well, and buckle down to complete your tasks.
Ensure You Have Proper Insurance Coverage
Keeping yourself properly insured is one of the most important aspects of having a business. Insurance can help in various ways, from legal fees to security protection.
There are multiple insurance coverages you should hold as an independent contractor.
Professional Liability Insurance
Professional liability is essential as a freelancer since you offer clients your services. With this coverage, you can pay legal fees if a client attempts to sue you for a contract violation. Also, whenever you want to sign a contract, make sure to use contract templates to save your time.
Mistakes can happen to anyone, and even if you make them with the best intentions, your clients may still feel that you violated their contract. A professional liability plan helps you protect yourself and your services against legal battles.
Cyber Liability Insurance
Cyber insurance is an important policy to purchase if you’re working from your computer. Cyber attacks are rising, and you could be held liable if your computer is hacked while containing private client information.
Cyber insurance will help to cover the costs of investigations into the attack, taking preventative measures to avoid another attack, and any legal fees if the company decides to take action.
Health and Disability Insurance
Although health insurance doesn’t protect your business, it does protect you in the event of an emergency. Since freelancers are unable to obtain company insurance, it’s crucial to find a private plan that fits your needs.
Disability insurance is also essential to have. If you have a medical emergency, you’ll want to have at least some form of income to help ease the burden of not working.
Don’t Forget to Prepare for Taxes Properly
When you’re working for yourself, it can often feel like you are generating an income that seems tax-free. However, that is not the case. Since you are not getting taxes removed from each paycheck, you’ll be expected to pay what you owe at the end of each tax season.
While most people look forward to tax time, business owners typically dread it since they will pay money rather than receive it. How you file your taxes is entirely up to you, whether you opt for a professional to do them or choose to take the task upon yourself. But it’s essential you’re prepared for when this time of year comes around.
It can be easy to forget about the money you will owe during the time leading up to the tax deadline. However, putting money aside early can help you avoid panicking about your payment when it’s due.
Create a separate account where you add a portion of each paycheck you receive. This account should go untouched until it’s time for taxes. This way, you have enough money set aside to pay what you owe without diving into your savings or draining your checking account.
The Business of Being an Independent Contractor
There are many perks to being an independent contractor, from the flexibility of making your schedule to being your own boss. However, there are some business practices that freelancers should remember to keep their operations running smoothly.
Managing money to prepare for dry spells, being accountable for tasks, having the proper insurance coverage, and properly preparing for taxes are all important aspects of being an independent contractor. By doing these business practices, you can ensure that you can continue to provide your clients with services.
Alexandra Arcand writes and researches for the insurance comparison site, Clearsurance.com. She is an independent contractor who enjoys the flexibility of her job but also knows the importance of proper business practices.