6 Mistakes Often Made by New Self-Employed Workers

Whether you're looking to go full-time or part-time, more and more professionals are turning to freelancing and entrepreneurship. It's a very different world from being an employee. Anyone can make a misstep, so here are six common mistakes new freelancers make and how to avoid them.

Not Taking the Time to Meet with an Accountant

If you want to become a freelancer, take the time to book an appointment with an accountant, but not just any accountant. Since there are many financial advisors out there, choose one who really understands the unique situation of freelancers and their laws, as well as the basics of entrepreneur taxation in Quebec.

Together, you can make a game plan and see if it's better to incorporate or not. It would also be good to discuss topics like taxes, available tax deductions, instalment payments, and your retirement. The more prepared you are, the easier it will be to dive into the world of freelancing. Of course, you can use Bankeo to find an accountant who meets your needs.

Sticking to Employee Rates and Mindset

A common mistake new freelancers make is holding onto an employee mindset. Since most have only known that reality, they apply what they've learned to the world of entrepreneurship. Unfortunately, to succeed as a freelancer, you need to let go of these ideas. Here are two examples:

A freelancer is more of a business partner than an employee:

Indeed, a freelancer isn't their client's employee, but rather a partner or collaborator. It's an equal relationship. For example, the client can't force the freelancer to only work for them or to work from their office.

To have a decent quality of life, I need to charge more than an employee:

Why are freelancer rates so high? The reason is simple: a freelancer has many expenses. They also have to cover their taxes, vacations, retirement, and insurance. Their billable time is also less than an employee's. According to calculations, a freelancer should aim for an hourly rate of at least $40 to live decently.

Not Getting Professional Support

Most freelancers and self-employed individuals wear many hats. They're responsible for finding contracts, invoicing, accounting, client follow-ups, promoting their business, and so on. After a while, this can become exhausting, especially if it's not your main area of expertise.

So, as we mentioned with our first mistake, take the time to surround yourself with pros. This could be an accountant, a business lawyer, a coach, or even a social media manager, a strategist, a graphic designer, etc. A virtual assistant can definitely lend a hand if you need one. Also, make sure to meet other self-employed folks at networking events. Not only will you grow your network, but you'll also get to chat with people facing the same challenges as you.

Not having a service contract that fits your situation

To protect yourself and your business relationships, it's a good idea to have a service contract. This should cover all the details of the service, like how it will be delivered, payment terms, intellectual property, and how to end the agreement. Often, just exchanging emails isn't enough to avoid misunderstandings and issues. Take the time to meet with an employment lawyer to go over everything you need to protect yourself.

We also want to take this chance to remind you that a contract you find online probably won't cover all your specific needs.

Not asking for a deposit before starting work

Along the same lines, another common mistake new self-employed folks make is not asking for a deposit before starting a project. But this is becoming more and more common in the business and freelance world because it helps protect you from clients who might not pay up.

Once the contract is signed, ask for a percentage of the total amount. You can do this with different payments throughout the project. Some freelancers ask for 50% upfront and 50% at the end, while others prefer 30% at the start, 30% halfway through, and 40% before sending the final files. Whatever method you choose, don't forget to put it in your service contract.

Not using accounting software to help you out

Finally, when you become a freelancer or self-employed, it's easy to feel swamped by everything related to your accounting, especially if it's not your area of expertise. Did I calculate my taxes correctly? Did I send that invoice or get the payment? Did I remember to log all my business expenses from last month? Did I keep all my receipts for tax deductions?

Luckily, there are tons of tools and accounting software out there to help you and save you from costly mistakes, like Momenteo, or even QuickBooks, Xero, and Sage. So, ditch those complicated Excel spreadsheets and shoe boxes for your invoices, and step into the modern age! You'll save both time and money.

Conclusion

As we said before, chances are you'll make mistakes as a self-employed person or freelancer, and that's totally normal. However, we hope you'll be able to avoid the ones we just talked about. Don't forget to take the time to build an awesome team around you and remember that you're no longer an employee, but your own boss. Good luck!

‍