There’s never a bad time to check your spending and reassess your expenses. While any business budget can benefit from a little belt-tightening, as an independent contractor you deal with smaller profit margins than large companies. That means the need to keep expenses to a minimum is more pressing.
We’ve assembled a list of 7 ways for independent contractors to easily and painlessly cut expenses to free up those funds for other, more important uses.
Whether you depend on a personal accountant for your taxes or a local store to assemble all your client reports, you may have noticed that many suppliers offer discounts for paying invoices as soon as you receive them. Not only will paying early save you money right away, but it will also help build the foundation of a strong relationship which can lead to more room for negotiating lower prices in the future.
Buying in bulk may reduce the price of each item, but a large order still costs significantly more than a small one. Consider whether you really need to tie up that much of your working capital. For example, do you really need a year's worth of paper at one time?
Opportunity cost is just as much of a factor in saving money as cutting actual expenses. If you are using your valuable time to perform menial tasks such as filing paperwork, organizing tax documents, or reviewing contracts, instead of revenue-producing activities, you are losing money.
Bringing on an intern or assistant allows you to delegate less specialized tasks and focus on running your business. MBO Partners' own Business Managers offer our associates many time and money-saving benefits in addition to back office services. Any one of these support systems can help you avoid the tedious work around invoicing, expense deductions, and quarterly tax filings.
Rather than spending money on products or services, work with other small business owners to negotiate a deal in which you provide them with an equivalent amount of services from your own business in exchange for what you need. Just be sure to lay out the terms of the deal in a contract to make it a legal transaction.
The high cost of software can put a serious dent in the budget of your business, especially if you use several different specialized programs. Open source software provides free alternatives to many popular programs, from Word to Photoshop, and files can usually be converted easily into formats compatible with client needs.
Some recurring payments like utilities are inescapable, but whenever it’s possible to buy equipment outright rather than lease it, consider doing so. If you’re able to find used or refurbished equipment, you may be able to realize even greater savings.
Not only will you have one less payment to worry about each month, but you’ll also be able to take advantage of the tax benefits that depreciation brings. If you must make an ongoing payment, use an automated or online bill paying tool, often available through your bank, to save the hassle and cost of mailing in bills.
Many solopreneurs use credit cards to pay for business expenses. What is the annual percentage rate on yours? Often, credit card companies are willing to work with cardholders to lower rates, which can save your business a great deal of money, both in the short and long-term.
As a 1099 you are responsible for paying quarterly taxes and a self employment tax. You can reduce the hassle and risk using these steps.
Independent contractor tax responsibilities can increase the chance of being flagged for an audit. Follow these four best practices to lower your tax audit risk.