With the new year upon us, now is the perfect time to reassess your expenses as an independent contractor. Any business budget can benefit from a little belt-tightening, but solopreneurs deal with smaller profit margins than larger companies, so the need to keep expenses to a minimum is much more pressing.
We’ve assembled a list of seven ways for independent contractors to easily and painlessly cut expenses in 2014, and free up those funds for other, more important uses.
1. Pay invoices early.
It’s a common practice for suppliers to offer discounts for paying invoices as soon as you receive them. Not only will paying early save you money right away, but it also cements a strong relationship between you and your suppliers, which can lead to more room for negotiating lower prices in the future, as well.
2. Reduce your inventory levels.
Buying in bulk may reduce the price of each item, but a large order still costs significantly more than a smaller one. Consider whether you really need to tie up that much of your working capital in inventory.
3. Hire an intern.
Opportunity cost is just as much of a factor in saving money as cutting actual expenses is. If you are using your valuable time to perform menial tasks, instead of revenue-producing activities, you are losing money. Hiring an intern allows you to delegate the less specialized tasks and focus on bringing in more income, while also providing valuable work experience for the intern.
4. Barter with other businesses.
Rather than spending money on necessary products and services, negotiate a deal with other business owners in which you provide them with an equivalent amount of goods or services from your own independent contractor business. Just be sure to set out the terms of the deal in a contract, to make it a legal transaction.
5. Use open source software.
The high cost of software can put a serious dent in a small business’s budget, especially if several different specialized programs are necessary. 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 clients’ needs.
6. Avoid perpetual payments.
Some of these are inescapable, such as utility payments. But whenever it’s possible to buy equipment outright rather than lease it, do so. Purchasing used equipment can result in even greater savings. Not only will you have one less payment to worry about each month, but you’ll be able to take advantage of the tax benefits that depreciation brings, as well.
7. Negotiate lower credit card APRs.
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.
By exploring these seven means of cutting expenses, you stand to save your independent contractor business a significant amount of money in 2014. Happy New Year!
News and notes for the independent workforce and their clients. This is the October 24, 2016 edition.
Learn how to calculate a cost-based bill rate with our new, easy-to-follow video tutorial.