Financial management for the flexible workforce the challenges facing IT contractors

Currently, the UK self-employed, freelance market comprises over 3.25m people and due to the project-by-project nature of the engineering industry, a sizeable proportion of this population is made up of engineers. While working as an IT contractor clearly has its benefits flexible hours, higher rates of pay and the freedom of working for oneself - there are also a number of challenges including having to manage the business finances effectively, finding new contracts and taking time off (as it is inevitably unpaid!).

To explore the trends in this market, Brookson provider of accountancy, tax advice and support services to self-employed professionals recently hosted a series of Round Table events inviting individuals representing professional bodies such as APSCo (the Association of Professional Staffing Companies), and PCG (the Professional Contractors Group), as well as journalists and technology providers.
 
The first Round Table discussion explored how self-employed professionals use technology to stay on top of their business finances while working away. In the second discussion, contracting trends were explored including the younger age range of today's contractors and the emergence of 'Collaborative Freelancing'. This article will outline the key findings from these discussions.
Accessibility contractors need 'real time' access to their business finances regardless of their location or working pattern
Financial information getting the detail right and making it accessible across a variety of platforms
Language conveying financial information in a way that is easily digestible
 
Accessibility
Accessibility to financial information was identified as one of the key requirements for self-employed professionals to keep on top of their business finances. Contract working often involves a high level of commuting to and from sites, contractors frequently find their work patterns changing, with anywhere from two to four weeks onsite followed by ten days off.
 
Martin Hesketh, managing director of Brookson, offers his thoughts: "These individuals are looking for real-time accounting figures which are accessible through all common channels ? web, email, phone and smartphone, on a 24/7 basis. These are professionals that want and need to stay on top of their accounts from any location."
 
The challenge herein is that accountants must be able to provide applications which operate on a variety of different platforms. As Marilyn Davidson, director at APSCo commented: "Users want consistency and reliability from their IT systems; contractors want what they expect to see, where and when they want to see it. Any accountancy technology has to meet these requirements, first and foremost."
 
Financial Information
The amount of financial data available from accountancy providers is also an ongoing issue for contractors. Lee Kingshott, information systems director at Brookson, explains: "Self-employed professionals expect to be able to see high-level summary information, for example, viewing a real time statement, as well as being able to drill down to a greater level of detail and view individual invoices and cash receipts, regardless of the platform it is accessed through"
 
In simplistic terms, self employed professionals want the same level of functionality from a smartphone, which they can get from a PC. A smartphone provides the perfect platform to manage accounting information remotely for instance Brookson allows its customers to draft and issue invoices through their iPhone app.  
 
The need for accurate financial information to be presented in a user friendly way was also indicated during the discussion as a high priority for contractors and self employed professionals. Contractors therefore need access to their accounts in 'real time' in order to get up to date view of information such as invoices raised, tax position and disposable income.
 
However, despite this increasing need to rely on technology to provide vital financial information, it is worth noting that while it may be possible to automate some elements of accountancy, the case for needing bespoke advice and support is a strong one. Martin Hesketh said: "There are a number of elements of accountancy, particularly for those who work on a freelance or contract basis, which cannot be automated online. IR35 for example is a very complex piece of legislation for which contractors must seek tailored employment law advice from a specialist to ensure they are working compliantly and within UK tax regulations.
 
"This type of legal advice from employment law specialists is so bespoke and is specifically tailored to suit each individual's circumstances. It's not as simple as adding a 'tick list' onto a website which can then make a decision on whether or not a contractor is working compliantly."
 
Language
The information available to contractors is ultimately redundant if it is not conveyed in such a way which makes it easily digestible.
 
Lee Kingshott said: "IT contractors are not trained accountants and neither do they want to be. They simply want key information about their finances presented in such a way which enables them to make quick decisions, where necessary, and have an understanding in basic terms of how much money they can spend and what needs to be kept aside for tax purposes.
 
Alongside the challenges facing contractors in terms of financial management, Brookson has also explored some of the emerging trends within the industry. These trends highlight how the self employed professional industry is evolving, creating opportunities for a wider audience and how contractors themselves are developing new ways of working to ensure they remain ahead of the game during the current economic climate. As with the issues
highlighted above, the concurrent theme of technology clearly runs throughout.
 
Trending topics
Contractor Age Shift contracting is now appealing to younger individuals selecting contracting as not only a career choice, but a lifestyle choice is technology feeding this change?
Collaborative Freelancing a new way of working for contractors across a variety of sectors

The Contractor Age Shift
Traditionally, the self-employed workforce has been predominantly made up of those in the later stages of their careers. In recent years, however, there seems to be a shift taking place through which the contractor market is now being built up by a younger generation. This has been attributed to a number a factors, the appeal of the contractor lifestyle and varied projects, the ability to travel and the lack of a nine to five working atmosphere. Technology is also one of the key contributing factors which is facilitating the change in the demographics of the flexible workforce. Susie Hughes, editor of Shout99, explains: "Younger contractors are a very IT literate generation and with technology driving the freelancing market, this is the perfect environment in which younger self employed professionals can thrive. Technology will continue to advance, and those ahead of the game will be able to use this to their advantage."
 
Collaborative Freelancing
'Collaborative Freelancing' is an emerging approach currently being used by strategically minded self-employed professionals up and down the country. Put simply, it comprises of a group of contractors or freelancers all with complementary or matching skill sets working under one title or name to provide services.
 
This new strategy offers employers, businesses and public sector organisations peace of mind that, in the event the initial contractor appointed to complete the assignment cannot continue, there is a 'bank' of alternative professionals available who could potentially fill the position at short notice.
John Brazier, managing director of PCG, stated: "A number of our members currently operate in a collaborative way and it is proving particularly successful for those contractors who are competing against larger consultancies to win Government contracts.

"The benefits of working in this way not only increases the appeal to the end client by providing a system of built in cover, but also allow the freelancers to raise their awareness to a much larger business audience and increase the chances of gaining contracts by word of mouth recommendation."

Interestingly, technology also plays a big role in facilitating Collaborative Freelancing. Contractors rely on social media as well as word of mouth to build a network of contacts and raise awareness of their work. While this concept maybe alien to some industries, it seems a natural progression in order for contractors to 'widen their net' in terms of generating project enquiries.
 
Summary
Based on the discussions had around the Brookson Round Tables, it seems that technology is potentially the key to the development of the contracting industry. For those working remotely their reliance on technology to help manage their business is paramount but it is also clear that technology is responsible for moulding the shape of the contracting industry as it moves into the future. Younger generations are leaning more towards a contracting lifestyle as it offers the opportunity to excel within the IT industry and using technology, the freedom to operate independently. Contractors are even using social media to widen their opportunity to secure more business and build new contacts.