Perhaps the biggest challenge of taking the leap from being a full-time IT employee to an independent technology contractor is learning the ins and outs of running your business. While your prime responsibility continues to be delivering on your IT projects, you can’t ignore your accounting and tax obligations.
If you’re considering a change, don’t be intimidated by the administrative work that comes along with the countless benefits of working for yourself. Instead, take a breath and watch this video from Dice to get some helpful bookkeeping tips for those starting out in the contracting world.
By Morley Surcon,
Vice-President, Western Canada at Eagle
Much has been said about the “Gig Economy” over the past couple of years. In today’s frenetic and “instant gratification” society, there are clear data suggesting that short-term contract work is growing in popularity for both workers and businesses who purchase their services. However, recently Canada’s Federal Government has been actively moving towards reforms in the tax laws meant to close “loop-holes” in the system to ensure everyone “pays their fair share”. The problem is that governments have a terrible track record — when it comes to making policy changes, there are often negative, unintended consequences.
The changes proposed will have an impact on independent contractors. There are three areas that the government wants to address:
Limiting the potential for income splitting between family members (also referred as “income sprinkling”)
Reducing the potential to earn “passive income” on monies that you decide to leave in your businesses vs. paying out to yourself in the form of salary or dividends
Stopping the conversion of income to capital gains
Are there people/small businesses that may take advantage in these areas? Most likely. However, the saying “tossing the baby out with the bath water” comes to mind. There are no shortages of commentary online about the potential impact of these changes. I’ve included links to many separate articles to legitimate news sites at the bottom of this blog in the event you would like to read more about this. But suffice it to say, there are likely to be significant consequences to you directly. Reasonable advice is offered in Armando Iannuzzi’s article on KRP’s blog entitled The good, the bad and the ugly of Ottawa’s proposed corporate tax changes where he answers the question: What should business owners do to prepare for these proposed tax changes? He suggests that there is no benefit to paying for legal or accounting work at this time as nothing is written in stone just yet. But you should keep “…these developments on your radar” says Iannuzzi, and ensure you have open lines of communication with accountants you trust.
Eagle isn’t a legal firm or accounting company, so we don’t provide specific advice to our contractors. We are watching this situation as it develops and are actively participating in industry organizations such as ACSESS and, as part of these groups, we are lobbying the government on the contracting community’s behalf. We are a bit surprised at how little the IT contractor community is saying about the proposed changes. Certainly, we are hearing from the medical profession, farmers and small business in general.
Are you following this as it develops? Do you have thoughts you’d like to share with our readership? I encourage you to leave your comments below!
Links to news websites that discuss the proposed changes:
Marketers talk frequently about “customer experience” — the concept that a good relationship with clients goes beyond service during the sale, and extends from the minute the customer has contact with the organization to the second they decide they’ll never need those services again (maybe even after). Companies who strive for an exceptional customer experience recognize that every touch point with that customer must be positive and memorable. Done right, this can give companies a competitive advantage over their less-customer-experience-focused competitors.
When it comes to hiring, great recruiters also buy into this idea to ensure the entire “candidate experience” is positive for all who apply. They consistently reach out with opportunities, answer questions and help at every stage of the hiring process. Similar to the customer experience, the better the candidate experience, the better the relationship will be between the recruiter and candidate.
A strong relationship with recruiters is a valuable asset for any independent contractor who is always looking for the next gig. Given the benefits of customer and candidate experience, could independent contractors apply the same principles to create a positive “recruiter experience”? At first glance, the idea seems backwards — after all, recruiters should be the ones bending over backwards for IT contractors — but at the same time, what a unique way to stand out from your competition (other skilled job applicants)!
How can you go above and beyond to create a positive recruiter experience? Think of everything you would expect from a company when getting a positive customer experience. Here are a few tips to get you started:
Keep communication open. Return phone calls and emails, update them on your status, and be honest in what you’re seeking.
Always be polite. When a recruiter calls you at an inconvenient time, misunderstands your experience or doesn’t solve your problem the first time, your immediate instinct could be to get angry. Try to take the high road in these circumstances.
Work hard to resolve problems quickly, accepting responsibility when necessary. Situations beyond anybody’s control happen during a job search and a contract. Bad things also happen that were within somebody’s control — maybe the recruiter’s, maybe yours. Regardless, work with the recruiter to fix things and accept your share of the blame if that’s the case.
Be proactive to help them get what they need sooner. Recruiting is a fast-paced business. If you get your resume or return phone calls before any other candidate, a recruiter will remember you in a positive light.
Make it easier for them to do their job. There’s no need to go into their office and recruit for them, but simply being accessible, providing enough details to questions, or giving referrals will show that you care about the recruiter experience.
Give something free every once in a while. Don’t worry, we’re not suggesting you offer to work for free. However, you can turn the tables and buy your recruiter a coffee next time you’re together.
A valuable relationship is built when both parties recognize that it is a two-way street, with recruiters arguably having to contribute more to the experience than contractors. That said, all IT contractors have been in the unfortunate situation when the best work is on the other side of a terrible recruiter who doesn’t understand the definition of service, let alone experience. In these cases, it’s up to you to provide the experience, become memorable, and increase your chances of winning this job, as well as many future ones to come. In summary, the recruiter experience and candidate experience go hand-in-hand, and we all need to do our part.
Eagle typically recruits independent contractors who work on technology projects at a client site, or at least in the same city as their home. Occasionally IT professionals will take a gig in another city and do some travel, and while this trend has picked up in the current economy, it’s still less frequent for us. As such, most of the posts in the Talent Development Centre are directed to IT contractors who work in their hometown.
There is another side of contracting and freelancing that we don’t touch on much, but may pique the interest of technology professionals, depending on where they are in life. We brag about the freedoms that come with working for yourself, including the ability to take time off and travel, but what about the ability to travel while working? This is a common practice and, if you’ve been meaning to see the world, may be something for you to try for a year or two. Before quitting your job or deciding not to renew your current contract, consider some of these tips for working while travelling the world:
Have a plan! This is common sense, but please do not pick up and leave with no plan. Know where you’re going to start, and more importantly, have a client or two lined up at your first stop.
Know your worth. Understand how much you can charge in the city you’re working. Remember, markets are different so what you make in one place may not equate.
Have an office. Doing contract work on a sidewalk or a coffee shop is going to get old. Do some research to share an office or workspace while you’re stationed in a city.
You may not always want cash. Prepare to barter. Perhaps you can work for a place to stay, a workspace, or even food.
Stay disciplined. Exploring new places and meeting new people makes it easy to get distracted from your work. Remember that your clients are the reason you’re affording to travel, so you must keep them satisfied and serve them first.
Organization is key. With such little consistency in your life, you need some form of organization and routine if you want to ensure you’ll get things done.
Pack light. Not just clothes, but you can’t be a technology diva either. It’s difficult to lug around a desktop computer and even some laptops may be excessive. Also keep in mind that everything you pack can be lost. Consider cloud storage and renting equipment with your office space.
Research the legal side. How long are you allowed to stay in a specific country? What are the accounting implications of working abroad? Discuss your plans with an immigration lawyer and have a thorough understanding of what you can and can’t do in every location you visit.
Find the right project and location is irrelevant. It goes without saying, but technology contractors especially rarely need to be in the same office as their client. If you plan right, you may be able to work on a single project from multiple cities.
Don’t forget to take in the experience. We’re stressing the importance of working hard and serving your clients, but you’re also experiencing something few people will ever do. Remember to take a few days and enjoy savour the experience in every place you visit.
Countless people dream of travelling the world in their lifetime and never do it. If you share that dream, possess the skills, and are in a position in life to do it, then get out there and enjoy the experience. Before you do though, know exactly what you’re getting yourself into and how you’ll deal with all of the challenges. Have fun!
By David O’Brien,
Vice President, East Region & Government Services at Eagle
In what was considered a stunning development to Industry, the Ontario Government announced its intent to make drastic changes to the way it procures IT Resources going forward once it’s current (and long standing) Vendor of Record (VOR) method expires early this Fall.
The Vendor of Record is an inclusive list of approved suppliers who provide the Ontario Government resources under the Task Based I&IT Consulting Services VOR. Last Spring, the Government asked the Vendor Community for input in how best to structure its next generation of IT Consulting Services VOR. The questions in the survey and the feedback compiled by large Industry Associations like the NACCB in no way resemble the drastic proposed changes sent out in late May in an RFB. In fact, it is effectively counter to public sector procurement objectives and the spirit on which that procurement is normally based — part of which is to support and encourage thriving Canadian small and medium size businesses.
The new VOR, by virtue of its massive qualifying mandatory criteria, will see likely over 300 of the current 317 vendors not qualify, as the intended vendor list will only be 10 going forward. The qualification criteria would suggest the 10 vendors can only be very large, likely multinational/foreign companies, of which many do not compete or provide for in a Task-Based resourcing environment. As such it’s expected few Canadian-based companies could qualify.
It remains a mystery to what constituency this serves in Ontario and is a perplexing direction from the Ontario Government for many reasons, here are just a few :
The new VOR will eliminate over 300 vendors, many of whom are thriving Canadian businesses. It may effectively kill them along with the well-paying jobs they provide in an economy where Canadian SMEs, as the government itself says, are “the backbone of the economy “.
These same businesses are effective components of the thriving Knowledge Economy and instrumental in the very critical Innovation Economy of tomorrow. This VOR will eliminate the innovation these small and medium sized IT companies provide.
Perhaps most perplexing is the idea that the Government hopes to reduce costs through a drastically pared down vendor list. As noted, the resulting winning bidders are very likely to be large, multinational technology companies who will be asked to operate in a Task-Based environment while having much higher overhead and costs. They do not operate on the lower margins of smaller, nimble companies in an open and competitive bidding process, so it is difficult to see how costs will be reduced
Given there has been a groundswell of opposition in Ontario to this initiative for these and many other reasons, we can only hope the feedback sought in this process is being heard and considered.
We want to work in a team full of competent IT professionals; it’s the most important factor in your project being completed successfully. But there are other elements that make a high performing team, especially their ability to work together. Therefore, we must also consider the soft skills in team members.
Past Talent Development Centre posts defined the soft skills we believe are important. In this month’s Contractor Quick Poll, we want to know which one you believe is the most important when it comes to choosing your team.
Staying organized isn’t everybody’s forte. While some contractors will naturally go through life, somehow managing to keep everything perfectly arranged, others are more laid back and let some little items slide. Either is fine, depending on the situation, but when it comes to accounting, those extremely organized (sometimes annoying) people are going to have less stress.
There are different elements to accounting and all require some planning and processes. Expenses, for example, specifically need regular attention in order to ensure you’re keeping within your budget, but also to ease your life when it comes to closing your books and doing your taxes. Here are 5 tips that independent contractors, in technology or any other discipline, can use when managing their freelance business:
Have a routine. Set a date to catch-up on all of your expenses and make sure you’re on track each week. This will stop you from falling behind.
Know your predictable expenses. Understand what regularly happens and what you want to save. This will help with budgeting.
Keep a separate bank account and/or credit card to easily separate personal and business expenses.
Find a way to track expenses that works for you. Try any of these:
The old shoebox trick: Throw all of your receipts into it and you deal with them weekly or monthly
A spiral notebook: One step above the shoebox, here you tape the receipt to a page and add notes about what it was
Your cell phone: The more high tech version of the shoebox or notebook is to take a picture of every receipt, immediately after receiving it. There are apps you can download that will help you organize all of them too.
MS Excel: If you’re a spreadsheet geek, record everything in Excel. You can really get crazy staying organized and categorizing items with this.
Accounting software: This requires an investment, but the right accounting software makes a huge difference in staying organized.
Get help. Specifically from an accountant, but also chat with other contractors in your field for ideas on how they’re organizing themselves.
Can you add any tips, based on your experience, that keep you organized in your technology consulting business? Please share them in the comments below!
In short, there’s no single milestone in a business’s maturity that dictates incorporation. It depends on a lot of variables, so it may require self-evaluations at multiple phases to determine when exactly the timing’s right for incorporating your small business.
When you’re conducting those evaluations, it’s important to create an accurate profile of your company and to give consideration to what it’ll look like as a corporation. There are distinct advantages and disadvantages to the title.
In the former column, you’ll have much greater flexibility with your taxes, including how you pay yourself—salary, dividends, bonus—or even if you pay yourself. A 15-percent preferred tax assessment on the first 500,000 of profit may prove to be all the incentive you need to leave your earnings in the company.
In the latter, incorporation isn’t inexpensive. And when you’re starting a business, expenses can already feel too numerous to track, let alone cover. Perhaps the only thing more precious than funding in those early days is time. Incorporation’s going to take a big bite out of that, too, because there’s more paperwork that’ll need to be filed—separate tax returns, notifications of share sales and directors’ actions.
If there is a brief answer to the question at the top, it’s this: Incorporating a business in Canada should not be entered into lightly. The more you understand, the more comfortable you’re likely to feel with your decision.
As one of the most respected accounting networks across Canada over the last quarter-century (and one of the few that’s ISO-registered), CA4IT specializes in business accounting services, including incorporation advising, for independent contractors, consultants and entrepreneurs. Click here for a free (no-obligation) consultation.
By Brendhan Malone,
Vice-President, Central Canada at Eagle
Why independent contractors in IT should always be on top of the latest tech trends
When I first started in recruitment immediately following Y2K, the market was very slow. Seasoned professional contractors were having tremendous difficulty landing contracts. Unless of course you were a technical or functional consultant in the ERP world and your experience was in the right module, it was tough.
What is the point of my statement?
There are trends in the industry that are worth following. After the most recent economic crash in 2008, financial institutions were looking for any way possible to reduce risk. Consultants and contractors with risk system experience were in tremendous demand in a down market.
Which quickly brings us to today. Is it luck if your area of expertise becomes in high-demand? Sometimes I’m sure good fortune plays a role. I would argue, however, that being on the cutting edge of market trends can take some of the luck out of it. Asking yourself a few key questions in regards to where you see demand for your skills and area of expertise going forward should be a weekly exercise.
The key point to mention is that the current in-demand skills are often times no more difficult to obtain or develop an expertise in than those that are diminishing in demand.
Artificial Intelligence is a perfect example of the importance of identifying current and future demand for your skills. AI is not going anywhere and companies will be relying on it more and more every day. Can your skills be augmented to provide value to this emerging area?
Automation is coming and coming fast, particularity in administrative processes. How do your skills apply here and if they don’t, how can you obtain relevant skills to automation?
People are browsing, shopping, and purchasing on their mobile devices at staggering levels. Only a few years ago it was primarily a device for browsing. Those who had the foresight so obtain mobile development skills have reaped the rewards of this demand.
This may seem like obvious considerations but the difference between having in-demand skills and not can drastically affect your standard of living.
A contractor should be on the hunt to educate and further their own skills and knowledge. Make sure you are always evolving in your professional life and you won’t be left behind but will stay at the forefront of technology changes.
The best independent contractors are the ones who clients see as experts in their field and the truly dependable, go-to person. They develop the best plans, troubleshoot the hardest problems, and come up with the best solutions to the most complex requirements. Above all, the most reputable and trusted technology contractors are the ones who navigate a crisis so smoothly that, even if the end-results are far from ideal, the client still feels they were supported by the most capable IT professional.
For the sake of this post, we’re considering “crisis” to be a situation when a technology breaks or malfunctions to the point that your client’s day-to-date operations are in jeopardy, services are drastically impaired, and/or money is being lost. The way in which you handle such a crisis to bring operations back on track impacts your reputation as an independent contractor significantly. So, when faced with such adversity, it’s in your best interest to roll up your sleeves, step up to the plate, and lead your client and the entire team through the turmoil. Great… so how do you do that?
Stay in the Right Frame of Mind: Before you even talk to people or start tackling issues, the first step when entering “crisis mode” is to be in the proper frame of mind. That means taking a step back to remain calm and positive, without letting emotion get in the way.
Evaluate the Situation: You still aren’t physically doing anything. Now that your head is in the right state of mind, you need to carefully evaluate everything that’s happened and is still happening. Know clearly which stakeholders are being affected, what’s needed to fix the problem, and who will need to be involved. It should be noted that these first two steps need to be completed as quickly as possible. Time is always a factor and it goes by quickly in a crisis, so you need to act quickly so things don’t spin further out of control.
Take Control: People act differently in a crisis. Some will do absolutely nothing except panic. Others will do far worse — they’ll do absolutely everything (usually unhelpful things). Your job is to take control to ensure people are doing what they need to be doing to get through the crisis — nothing more and nothing less. Show your understanding of the situation, explain your plan, and exude confidence so that people want to follow you.
Start Delegating: Assuming you’re in an environment where you’re the most senior person with the most knowledge of the affected technologies, doing all the work means others are sitting on their hands. You may feel like you’re not contributing, but organizing different people and coordinating outcomes is the task a leader needs to focus on.
Stay Realistic: If you’ve properly evaluated the situation, then you should know what the best outcome is going to be. The crisis will end in a worst situation than when you started, so prepare for that and don’t try to fix everything perfectly quite yet. At this stage, you’re still trying to stop the bleeding, regain control, and get everything working well enough so daily tasks can resume.
Evaluate the Situation: We loved Step 2 so much that we’re bringing it back. Once the problem is solved and business is back on track, it’s time to evaluate the situation. What went wrong? What’s still wrong? What was the impact? Who needs to be informed? These are all important questions to discuss with your client to ensure that the crisis is over and that it doesn’t happen again.
Sometimes, your job as an IT contractor in a crisis situation is to follow the delegated person on the client site. In these cases, follow protocol; the organizational structure of your client site will dictate if you’re the right person to lead or not. If you are required to step up, how you react in a crisis will have a direct effect on how those around you also deal with the situation. By leading calmly and rationally, people (especially those who are panicking) will want to follow you. When you maintain a level head and follow the steps above, your followers will too, resulting in a successful end to the crisis, so you can start putting pieces back together and move your project back on track.
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