Learn the reasons why invoice software or an AP system like Bill.com is not enough for managing freelancers.
Accounts Payable (AP) software like Bill.com helps many small businesses streamline their invoice payments. But when it comes to managing 1099 workers, you need more than an AP/AR system to simplify and streamline work — both for the hiring manager and your accounting team.
AP software like Bill.com is designed to simplify and automate invoice management and payment. In an AP/AR system, your vendor can send you an invoice via email, and you can pay it through the platform. This type of setup works well for working with vendors for general procurement purposes. However, engaging 1099 workers is similar while also different from engaging vendors. Likewise, the processes with 1099 workers are similar and different from those with W-2 employees.
Hiring 1099 workers is more complicated than hiring a widget vendor. Relying on an AP/AR system as your primary method to manage your freelancers and contractors will increase the complications and work involved. You need a system that not only manages your invoices and integrates with your financial system of record but takes care of all the other steps and processes — saving you time and money.
Engaging a 1099 worker (freelancer, contractor, or independent consultant) has many of the same requirements as working with other vendors for your company. Essentially 1099 workers are a special type of vendor where you need to ensure that the worker has been correctly classified as a 1099 worker and not a W-2 worker.
So just as with any other vendor, you should always have a contract in place, such as an independent contractor agreement or Master Services Agreement (MSA). With an executed MSA, you not only protect your company but make it fast and easy to start all freelance projects, which is essential for maximizing the benefits of working with on-demand talent.
With a freelance management system like Liquid, you can readily create and execute agreements online. Then you can quickly generate a Work Order (WO)or Statement of Work (SOW) to initiate each project — or your freelancer can submit a project proposal. Plus, you can protect confidential and proprietary information by also executing a Non-Disclosure Agreement (NDA).
With Liquid, you can create a customized onboarding process and onboard freelancers in just minutes. The onboarding process collects all the essential documents you need to engage and onboard a freelancer. You can make the onboarding process even easier by using our contract and document templates, or we can templatize your company’s documents for you. The files are organized for easy retrieval so that you and your 1099 worker can easily access the agreements and documents at any time.
When engaging freelancers, contractors, and independent consultants, you must always collect the information required by the IRS. For US workers, you need to collect W-9 forms, while W-8 forms are required for international workers. These forms provide the information that your company needs for tax filing.
Although companies do not pay payroll taxes for 1099 workers, they do need to send Form 1099-NEC or Form 1099-MISC to every individual or vendor to whom they have paid $600 or more during the tax year. Liquid makes this easy by automatically collecting W-9/W-8 as part of the freelancer onboarding process, simplifying generating 1099s at the end of the year.
Paying Freelancers and Vendors?
Our customers report that using Liquid allows them to put off hiring an Operations Manager and/or Bookkeeper.
Worker Classification Compliance
All companies need to ensure that they meet independent contractor compliance requirements and have classified workers correctly as either 1099 or W-2 workers. Many behavioral, financial, and relationship control factors determine the classification, and the rules can vary by state (for example, California’s AB5 and ABC test requirements).
Liquid has built-in features that help you address independent contractor compliance. For example, creating projects (through WOs / SOWs) in Liquid addresses behavioral factors by demonstrating that freelancers are being evaluated solely on the end products or services delivered. Liquid helps address relationship factors by simplifying the signing of independent contractor agreements and separating the management of W-2 employees from 1099 workers.
An invoice system like Bill.com can’t help your company easily and accurately show any government regulators (federal, state, or local) that you are properly classifying your workers.
Simplified Invoice Management
You don’t have to sacrifice streamlining your invoice management by using a freelance management system.
Your 1099 workers can create invoices based on their WO / SOW in less than a minute within Liquid. Plus, we make it simple and fast for your company to manage invoices with our invoice matching and invoice approval routing. With invoice matching, you never have to worry about accidental overbilling (or use of incorrect rates) by freelancers or contractors — our matching logic automatically checks each invoice against its WO/SOW and flags any issues. Invoices are automatically routed to the right individuals for approval, following the custom rules set for your company.
We’ve made payments simple, too — through our partnerships with global banks, you can make payments to freelancers and contractors in over 175 countries via ACH and credit cards. Your 1099 workers will reliably and securely receive their payments within 2-3 days of your payment approval (or the scheduled payment date that you set).
And Liquid makes managing your financials easy by integrating with other systems like QuickBooks.
Cost-Efficient Freelancer and Contractor Management
Accounts Payable software systems like Bill.com typically charge companies a per-user fee. Liquid keeps your costs low with a flat fee per month (or with our starter plan, which is ideal if you have 10 or fewer invoices per month, there is no platform fee). There is no per-user or per vendor fees — saving you and your 1099 workers money. Our payment transaction fees are low — $3 per domestic ACH or 5% per credit card transaction; $8 per international ACH.
Using Liquid provides you with all the benefits you expect from automating accounts payable and payments for freelancers while also making engaging and managing your freelancers/contractors simple and fast.
Manage Freelancer Contracts, Compliance, and Payments in One System
Working with freelancers and contractors requires a system that supports HR, legal, and finance processes. You need more than an invoice management system. The features that our users love help them save time and money, allowing them to focus on getting projects done rather than paperwork. It’s why our users have switched to Liquid to manage their freelancer and contractor engagement — on average, our users had to juggle 7 or more systems (or manual processes) to do everything that they can now do simply and cost-effectively through Liquid.