3 Best Practices to Quickly Onboard and Pay your Freelancers
Scaling a business often requires an increase in manpower, so companies often hire freelancers to meet the immediate demand. How does the onboarding of freelancers affect your accounts payable workflow? Paying a freelancer is essentially making a B2B payment. A quick onboarding process enables your freelancer to immediately provide contracted services, but it should not be at the expense of causing tax and payment issues down the line.
By definition, freelancers are self-employed individuals who offer contracted services. Highly sought freelance services include accounting, software, management consulting, and multimedia production. Usually, contracts with freelancers are short-term or project-based, but with the rise of the gig economy, an increasing number of companies are hiring independent contractors for the long term. When it comes to your accounts payable workflow, here are three best practices that will effectively streamline the onboarding of freelancers and ensure your accounts payable can issue payments on time even as your business scales:
Implement self-service onboarding
The primary role of Accounts Payable is to pay the invoices for a company; however, some Accounts Payable end up operating more like a “help desk,” answering questions and guiding suppliers or vendors with the onboarding process. While serving as “help desk” may sound like it aligns with the purpose of Accounts Payable, the practice turns your AP staff into customer service representatives. If you want your AP workflow to scale with your business, you need an AP staff that can focus on analyzing and aligning business processes with the growing needs of your company.
Supplier self-service onboarding takes on the “help desk” role. Also called a supplier portal, self-service onboarding refers to a web interface where vendors (such as freelancers) input tax information, send invoices, track the status of a payment, and more. Simply put, self-service onboarding gets your new freelancers quickly up and running on your payment system and started on contracted services so your business can scale.
Build in tax verification as part of the onboarding process
Accounts Payable should always require new vendors to submit their Tax Identification Number (TIN) during the onboarding process. Often, AP obtains this information by having the new vendor submit a W-9, a tax form for the Request for Taxpayer Identification Number and Certification. Accounts Payable uses this form to file a 1099 tax form, which reports the total annual payment made to a vendor. Freelancers often use their social security number for their TIN, but sometimes they obtain an Employer Identification Number (EIN) and use that as their tax identification.
A self-service onboarding makes it not only easier to collect a TIN but also to verify it. E-services tools on the IRS website enables companies to check names and corresponding TINs, but companies can make this process align with their workflow by building in tax verification into the self-service portal. Instead of drowning in manual data entry and verification, Accounts Payable can focus on other business initiatives.
Leverage automated trigger-based messages to resolve missing or erroneous data
Accounts Payable can maximize self-service onboarding by leveraging trigger-based messaging, a tactic borrowed from marketing. Sending notifications triggered by a specific moment ensures the likelihood of a response. Marketers often use this tactic for email campaigns, but Accounts Payable can leverage the same trigger-based messaging principles to remove a common bottleneck in the AP workflow: collecting missing data.
In manual-based AP system, following up with vendors for missing information was reactive—in other words, AP addressed problems when issues came up. However, the approach delays payments to suppliers and takes time away from other value-added business objectives. An automated Accounts Payable system sends messages triggered by an event—such as missing TIN information during the onboarding process—thus removing the manual efforts to collect the missing information. The proactive communication approach is necessary for quick onboarding new vendors and preventing errors with payment processing or tax records.
As your company turns to freelancers to quickly scale operations, your accounts payable needs to coordinate its processes with the growth. These best practices take the “pain” out of growing pains with proactive communication and self-service onboarding. When freelancers can submit, verify, and correct their tax information, your accounts payable can nimbly align the workflow with business growth.
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