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Accounting Tips: Managing Your Independent Contractors

outsource work to independent contractorsAs a business owner, it’s important to regulate your processes, especially if you are outsourcing accounting tasks. Having a number of independent contractors can pose a huge problem when protocols are not in place to make sure they are properly regulated.

From Inc. Magazine, here are a few tips that will help in establishing a great working relationship with your contractors and maintain the integrity of the business transaction:

  • Classify contractors, and delineate a clear distinction between your contractors and employees. Doing this will ensure your company avoids any liability or claims about whether the contractor is really an employee. Independent contractors set their own hours and handle everything else that is needed to get the work done.
  • Have clear objectives for the tasks to be performed. A defined scope of work and timeline should be conveyed to contractors before they start work. All expectations from both parties should be outlined.
  • Make sure everything is agreed in written form or a contract. All important communications should be in writing in the event there are discrepancies. Any confidentiality clauses or ownership claims should be outlined.
  • Get all the tax-filing information you need to establish payments and record-keeping for tax purposes. This will help when issuing 1099 forms at the end of the year.
  • Make sure contractors have a point person to contact in the event they have questions or need assistance.

Independent contractors can be an asset to your company if used effectively. Quite a few business owners run into problems when they treat contractors as employees. Knowing the guidelines and maintaining the rules of independence are the keys to ensuring mutual understanding.

Some other factors that are important:

  • As a business owner, you should make every effort to pay your contractors in a timely manner unless other arrangements have been made.
  • If the contractor is reliable and does good work, make sure you convey your satisfaction. There’s nothing more valuable than a company that is pleased and shares this information. It puts you in a good place as an employer and can help the contractor continue to do a great job.

Until you can fill all your business roles with in-house employees, independent contractors are a great resource to cover the gap (and may even make more sense than hiring employees for some roles). Make sure you do adequate research and get referrals. As a stepping stone, independent contractors can help you grow your business to the levels you desire.

Need help classifying your independent contractors? Our accounting and bookkeeping experts can help!

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