How to overcome challenges faced by contractors
Table of Contents
You’ll face many challenges as a contractor, but your success will depend on your ability to overcome them. If you prepare yourself ahead of time, it’ll put you in a better position to deal with those problems.
Challenges can range from dealing with clients or to the way you manage being self-employed. To make things easier, we’ll cover everything you need to know.
This guide discusses the common challenges faced by contractors, including:
- Too little or too much work
- Contract rates
- Managing taxes
- Not getting paid on time
- Client claims against you
Too little or too much work
Too little work
A term you may be familiar with is ‘being on the bench,’ what contractors call not being on a contract.
This situation has its own phrase, because it’s common. Unfortunately, those who do jobs that rely on short-term contracts are sometimes out of work. But there are also ways to overcome it.
To help keep a diary of what you do on those days without work. If you write down all of the productive things you do, including networking events or email marketing, you make yourself more likely to get a job in the future.
If you don’t write things down, you could feel like a day has been wasted and lose motivation. Essentially, you are changing from seeing the situation as being out of work to ‘working’ in a different way.
Beyond searching for the next contract, going for a walk or doing exercise can improve motivation looking back on the day. If you spend your day unproductively, you are more likely to want to give up on the search and won’t find work.
VS too much
Just as too little work is a problem, it’s also common for contractors to take on too much. Initially, the prospect of more money is a great incentive, especially if ‘on the bench.’
But if you overwork yourself, you can end up providing a worse service than you would normally. This will make it more challenging to build a reputation for being a great contractor, which is counterproductive for getting future jobs.
Instead, be realistic with your time and also keep a diary for when you work on your contracts.
Contract rates
The rates that you can charge each client vary. Eventually, you want to build a skillset and reputation that allows you to get a rate you feel you deserve. A lot of the time, though, it will likely depend on the client.
Some will be willing to pay more than others, and it can vary depending on different industries. You may end up having to accept contracts that offer less than you would like.
To improve your ability to charge higher rates, you can expand your range of skills. If you can find skills in demand, take a course to improve what you have to offer.
You can also compare similar contracts available within that same industry and aim to negotiate with the client. Suppose you have years of experience and various abilities. In that case, you’ll be in a better position to charge a higher rate with more credentials behind you.
The Open University offers a wide range of online courses you can take on with varying fees depending on the levels of certification you want.
Managing taxes
Another common challenge faced by contractors is managing taxes. If you own a limited business or use an intermediary (agency) to find work, you could be affected by IR35 tax legislation.
To tax ‘off-payroll working’, the UK Government has additional rules that can affect contractors.
If affected you would have to pay the same income tax and national insurance contribution as a regular worker for your client.
But because you are unlikely to receive the same benefits as an employee (sick pay, holidays and security), if you are a self-employed contractor you can be taxed this mistakenly.
If the UK Government investigates you, you could have to pay the additional IR35 Tax. But if you review contracts thoroughly and get IR35 insurance, you can avoid any issues with your status.
Legal protection insurance covers IR35, for contractors, which is available from Superscript.
With its built-in accounting software, you can also take out a business account with Countingup. One feature is tax estimations. They can mean that it becomes much easier to manage when you file your income tax Self Assessment.
Not getting paid on time
The varying clients that you work for can bring their own challenges. You might find that some clients aren’t as timely in their payments. That can cause you problems with your cash flow (money coming in and out) which can mean struggling to find funds to pay yourself.
Countingup’s app provides you with regular cash flow insights to keep you updated.
To avoid any issues for payments affecting your personal life, you can prepare for delayed payments. By setting money aside for the possibility of clients not paying on time, you can stay afloat.
To make sure you give clients plenty of notice and keep a record of every billing, Countingup can help. The app allows you to create, send and store your invoices conveniently. So, you’ll always be able to keep track of what you send and if you receive payments.
Client claims against you
A client could be unhappy with your service as a worst-case scenario. Sometimes mistakes are made in every job, but there are some additional challenges faced by contractors from clients.
You can provide them with professional advice or a service that leads to financial loss. They may then take legal action against you. Clients can threaten to sue you, and you would have to pay for all court fees.
Professional Indemnity insurance is available to avoid the time and resources that any claim would use up for you. It can cover the costs of going to court and the compensation you may need to payout.
To take out this cover, see what Superscript offers.
Overcome financial challenges with Countingup
Aside from invoicing and taxes, Countingup’s business account with built-in accounting software can make financial management more effortless as well.
As a self-employed contractor, you’ll likely have costs you need to cover, like fuel for transporting to jobs. With Countingup’s receipt capture tool, use your phone’s camera to add paper bills to your accounts.
Start your three-month free trial today.
Find out more here.