Managing your finances

Invoice clients as soon as you’ve finished a job, or at regular intervals depending on the duration of your contract and the agreed-upon terms.

Consider utilising online accounting technology to send invoices and keep track of their payment status. If you offer a service and expect to be present with customers after completing the work, such as fixing a washing machine, consider using a mobile app to receive immediate payment. Additionally, ensure that you provide them with a tax invoice containing your GST details, as you will require a copy for your tax records.

Make use of our invoice template, which can be easily edited on your computer or smartphone. Simply input the necessary information, and the template will handle the calculations for you.

Keeping tax records

Invoice template [PDF, 196 KB]

If you’re contracting through an agency, they may require you to submit an invoice at specific intervals, such as weekly or monthly.

If you’re contracting directly with a client, it’s important to establish and agree upon payment terms beforehand. Include these terms on your invoice, such as the hourly rate, and specify that payment is due within seven days from the invoice date.

It is customary for businesses to request payment for work performed during a given month on the 20th of the following month. For instance, if you complete a job on March 12, you would request payment on April 20.

Getting paid on time

To maintain a healthy cash flow, it is essential to keep track of which invoices have been paid and which ones are outstanding.

If you have multiple clients, establish a system to quickly identify which invoices have been paid. If working with spreadsheets isn’t your preference, a simple method would be to mark the invoice as “paid” along with the date and file it away for easy reference. Online accounting software can also assist you in managing your finances.

Record keeping tips

Maintaining a buffer of three months’ income will alleviate the stress caused by gaps between jobs.

If you are contracting through an agency, you will be required to complete timesheets that detail the hours you have worked. These timesheets will be used for billing the client.

Make sure to check the agency’s pay run schedule and ensure that the client signs off your timesheets in a timely manner.

Even if timesheets are not mandatory, you adopt this practice as a discipline. Record your hours as you go instead of trying to recall them at the end of the day or week. Consider using a smartphone app for this purpose, as there are several available in the market, many of which are free.

It is important to determine how you will charge for your time, such as hourly, half-day, full-day, or weekly rates, and include this information in your service contract.

Regularly save sufficient funds, such as when invoices are paid, to cover your income tax, ACC levy, and, if applicable, GST. Maintain a separate account for this purpose to prevent accidental expenditure. Consider opening a high-interest account and utilising the interest to offset other contracting expenses, like indemnity insurance.

You can explore various strategies to lower your tax bill, such as claiming eligible expenses and taking advantage of early tax payment discounts. Engaging a tax agent, such as an accountant, is a prudent initial move as their expertise can save you valuable time and money. Managing your finances is one of the most important and quite often not very straight forward when you are new to it, so it is recommended to seek support from professionals to save you time and reduce the risks of mismanagement.

Full income – Allowable expenses = Taxable income

Introduction to taxes and levies

Grab a first-year tax discount

Claiming expenses

Putting money in a separate account for income tax, ACC, and, if you’re registered, GST, reduces the chances of you splurging it.

It’s a smart idea to have a business account so you can keep your contracting and personal expenses separate. You can deduct business account fees as an expense.

Securing a loan, such as a mortgage, can be challenging if you’re not a permanent employee. Certain banks may request two years’ worth of tax records, while others have accommodations for individuals with fluctuating income. However, be aware that higher interest rates might apply in such cases.

Effective communication with your bank is crucial. Inform them about your contracting status and inquire about the necessary documentation.

Consider the option of setting up an overdraft to prepare for periods of reduced income. It’s important to establish it ahead of time before the need arises.