As an employee, you only have to do your assigned duties and wait for your payment at the end of the week, biweekly, or monthly. Also, what you can or cannot do is controlled by your employer. Your employer will also be responsible for all financial management tasks of the company.
While you may enjoy some freedom by venturing into self-employment, you will also take up some duties you did not have to do as an employee. If you are unsure of the financial administration tasks you will need to handle in your new status as self-employed, this guide is a good read.
1. Payroll Management
You do not always have to have an employee when you go into self-employment. Most self-employed individuals wait until a business picks momentum to take in employees. But there are specific industries where hiring an employee is inevitable.
Irrespective of when you take in employees, you will need to manage their payroll once you have them. Payroll management can be pretty challenging if you do not have a solid plan in its approach, and it can easily give rise to legal challenges.
Luckily, many online payroll management tools can help you streamline your payroll management.
2. Generating Your Paystubs
A pay stub outlines an employee's gross earnings, bonuses, hours worked, statutory deductions, and net pay. Part of your payroll management may include issuing your employees with these documents. However, issuing pay stubs is not a requirement in all states.
But you do not have to be an employer to create pay stubs. If you work as a freelancer, creating paystubs for every project can be one way of ensuring that you keep track of your earnings and taxes owed to the state and the federal government.
Creating paystubs can be complicated, but you do not have to do it manually. You can easily generate your own pay stubs online using a paystub generator. Such tools often do the task in a few steps and allow you to download or print it.
3. Project Estimations
If you are in the service provider type of business, such as a construction company, one of the areas you will find challenging is pricing projects. Unfortunately, there is no way around it.
If you charge too low, you risk running into losses. Also, clients may view too cheap a red flag, so you may end up losing on deals. You will lose business to your competitors if you charge higher than the market average.
As a new entrant, you do not want to go too high, but it's advisable to be slightly under your competitors because they will have a competitive edge over you. Like payroll management, it is possible to automate your budgeting process by leveraging project management tools that help eliminate errors to ensure that you get your pricing right.
4. Withholding and Remitting Taxes
The last thing you want as a startup is to get into trouble with the IRS by not honoring your state and federal tax obligations. If you have employees, you must deduct their taxes from their pay and submit it to the relevant state and federal body.
If you do not have employees, you will still need to file your personal and business taxes with the relevant bodies.
Tax issues can sometimes get pretty complicated, so if you are not sure how much you are supposed to pay, hiring tax experts can save you the cost that would come from making a mistake in your taxes.
5. Other Obligations
You may want to take care of a couple more financial obligations in self-employment. For example, you will need to have retirement savings plans where you will be the sole contributor.
Also, you may want to carry insurance coverage for liabilities that could arise in the event of harm caused by your business to third parties and employees. If financial administration duties are challenging, you should consider taking classes to hone your skills.