Here are some ideas from James Leckie from Contract Eye. Although aimed primarily at IT contractors, many of the tips can be applied to freelancers in other industries.

1. Keep an eye on your cashflow

The advice is the same for all small businesses in the current economic climate – make sure you preserve cash. IT contractors are vulnerable to the whims of clients who may suddenly be forced to cancel projects. You should always try to keep enough money saved in case your are ‘on the bench’ for a period of time.

2. Don’t spend the taxman’s money

One thing you must never do is to spend any money you have saved to settle your tax liabilities. Ideally, you should put your tax and VAT (if registered) liabilities into a separate bank account, and never spend them. If you are a limited company contractor, it is illegal to distribute dividends to shareholders if they cannot be funded from profits alone.

3. Bank accounts

If you use a separate account for your business income, you should look around for a current business account which provides either free banking, or very low transaction charges. It is almost impossible to find business accounts which yield any amount of interest at the moment, but you can still save money by being wise in your choice of bank. You can compare business bank accounts on the Moneyfacts site.

4. Extending contracts

Unless you have a 100% guaranteed contract placement to go to, you’d be wise to accept contract extensions in the current climate. You may also need to absorb ‘across the board’ rate cuts which have affected contractors at many major companies, not just investment banks over the past year. You can keep up-to-date with the latest contract rate news here.

5. Check out your CV

If you’re out of contract, or even if you’re not, now is a good time to ensure your CV is ‘fit for purpose’. Try to keep your CV down to 1 to 2 pages, and make sure it looks professional and accessible. Recent anecdotal evidence suggests that agencies are starting to vet potential contractors via online searches – so make sure your ‘real’ CV matches any claims you’ve made on social networking sites!

6. Keep in touch

Now is not the time to live up to the old ‘anti-social’ stereotype which is sometimes applied to IT freelancers. As in all professions, most of the good roles will come from people you know. The first people to be aware of a new contract requirement on a project are often existing contractors rather than recruitment agents. So, make sure you keep in touch with old colleagues, and be the first to know of any new requirements.

7. Make yourself a ‘super contractor’

Being one of the ‘essential’ people a project is a great way to ensure your security during an economic downturn. Do whatever it takes to become indispensable – work extra hours, deliver high quality work and most of all, keep on the right side of the decision makers. A recent report from Morse claimed that most IT directors were still relying on contractors despite the recession, so make sure you are still ‘relied upon’ when it comes to renewal time.

8. Be realistic

In the early 2000′s downturn following the dot com ‘bust’, many IT contractors found it hard to secure new contract work. However, many others continued to prosper as contractors, by accepting lower rates, or diversifying their skills. We’ve always found that contractors who are willing to be proactive are more likely to come through bad times relatively unscathed.

For more contracting guides… see the Contract Eye website

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