Here are 5 of the most common challenges we believe independent contractors would face while setting up their own Pty Ltd and how they can deal with it…
Business Activity Statements (BAS):
If you are a business registered for GST, PAYG, withholding tax or any other taxes, you need to lodge a BAS. This helps the government in letting them know how much GST have you collected and how much you have paid. This information is then used by the ATO to work out your GST refund and bills. Depending on the size of your business; you will have to report BAS monthly, quarterly or annually. Completing the form and lodging BAS 4 times a year (depending on your business size) can be a nightmare.
Invoicing:
Invoicing and payment from your customers is the most critical part of running and setting up your own Pty Ltd. To send accurate invoices, you must carefully track your time and create detailed invoices as soon as you complete your client’s project. Once your invoice is done, it is your job to keep chasing the invoices until your client pays. Setting up an invoice and particularly chasing them can be time-consuming and would give you less free time to focus on your core business, plus it may affect your cash flow.
Cash flow:
Cash flow is essentially your business’s wallet. It shows how much money you actually have at a certain point in time. As mentioned above, if you do not invoice correctly or are struggling with chasing your overdue money, it will affect your cash flow. Lack of control or knowledge about cash flow may cost insolvency for some businesses.
Multiple contracts:
Depending on your type of business, being a contractor may require you to handle multiple contracts. Managing and dealing with multiple contracts at the same time and getting the clients to sign the documents quickly may not be your cup of tea!
Insurance:
As an independent contractor, signing a contract with your client means they trust you to get the job done and don’t micromanage you at every step. This gives you the freedom to work and do things your way. However, this independence also means that you are completely responsible for your own financial situation. Hence, insurance is necessary for an independent contractor running their own Pty Ltd company. These include insurances like Public Liability, Professional Indemnity. In some cases, Workers Compensation is a must in order to protect you from any damages or accidents that may occur (depending on your line of work). Considering you are self-employed, this may cost you thousands of dollars and will affect your cash flow.
Would you like to remove all the headaches of contracting? Let Pendragon help you get rid of it! We specialise in contractor management services, that means, we set up your invoices and debt collect, claim your expenses, alleviate the need for you to report to the ATO (completing a BAS), manage and deal with your multiple contracts while assisting your cash flow and at the same time providing you with all the relevant insurances. All you have to do is focus on your current contract and leave the rest to us! For further details contact us on 02 9407 8700 or reach us at [email protected]