It’s funny how some things have changed in the last 40 years regarding contractors but much hasn’t. When I started consulting in 1976, the biggest single problem contractors had was not knowing their numbers and having poor financial information. That’s still true today. The vast majority of contractors who join our networking groups have a poor understanding of where they make and lose money. In many cases, some simple evaluations quickly identify weak areas. Dependent on the business’s size, the contractor can suddenly make 30-75k more profit per year. Here are some of the more common financial mistakes we see contractors making.
Many small to mid-size contractors let their accountants keep all their financial records off-site. They’re processing payroll, making tax deposits, etc. but the contractor’s on-site records aren’t updated or usable on a monthly basis. I always chuckle when I ask a contractor how they’re doing and the reply is, “Not sure, haven’t gotten my books back from my accountant.” Accounting is merely scorekeeping. It would be absurd to ask the basketball coach at halftime how the team is doing and have him reply, “I’m not sure, I have to talk to the scorekeeper.” As a contractor, you call all the plays, make all the decisions and drive the business, and you need good financial information to make those decisions.