How to Make Contractor Payments Accurate, Fast, & Reliable

The most challenging part of being a contractor? Getting paid.

We don't blink an eye when W-2 employees get fast onboarding, biweekly paychecks, automatic tax withholding and access to benefits. But their contractors—a community of more than 60 million Americans that do some kind of freelance work for their career—have to chase down invoices every single month. And just like your W-2 employees, your contractors rely on this work to pay rent or put food on the table. 

For companies that rely on 1099 contractors to generate revenue and interact with clients, paying those contractors accurately and on-time takes on massive importance. It’s time to stop thinking about contractor payments and start thinking about contractor payroll. 

I chatted with David Henry, Head of Marketing at Wingspan, to talk through why accurate, fast, and reliable contractor payments are so important for companies that run on flexible work—and what finance and accounting teams should consider when managing their back office processes. You can watch the entire session here, or read on to get the recap.

(Pssst…this is part two of a three-part series as part of our free Contractor Payable course. Check out the first session on contractor onboarding here, and sign up here to attend our session on compliance happening later this quarter.)

How to improve accuracy, speed, and reliability for your contractor payments

Using traditional HR and AP systems like Stripe, ADP, or Bill.com that handle payroll perfectly fine aren’t built to manage paying contractors at scale. Pourtastic Tastings founder Keith Diamond felt frustrated from the convoluted money flows he had to hack to make Stripe work for his contractor team. “Getting payments out to our contractors is obviously critical to what we do,” he says. “If they don’t get paid, we’re done. If they don’t get paid on time, we’re in a lot of trouble.”  

That kind of awkward process is a common experience for finance teams, who are left stitching together two separate legacy systems that can’t actually process payments quickly and effectively — making accurate, fast, and reliable payments a challenge.

But it doesn’t have to be that way. Here’s how you can streamline your contractor workflows:

Accuracy: Table stakes for your contractor management

Even the most detail-oriented accountants can make mistakes sometimes. All it takes is accidentally typing an extra zero. (Believe me, I’ve been there.)

Accurate contractor payouts mean:

• Visibility for contractors when they’re getting paid so that it’s tied to a record of the work being performed.
• Integration with other systems of record to ensure a single source of truth, so both contractors and the finance team understands how much each contractor gets paid and when.
• Transparency for contractors and AP teams to simplify reconciliation and dispute resolution. Enable your finance team with the data and information they need to repair them, fast.

Mistakes happen. What matters is having a system of record that makes it easy to identify and fix them as soon as possible.

Speed: Instant payouts are a lifeline for contractors

The most important thing for contractors is getting paid quickly—and being able to access their money on-time. 41% of contractors prefer weekly or biweekly payments.

Fast contractor payouts mean:

• Providing instant payment options and flexible payout methods. 84% of contractors would choose instant payments if given an option, and 46% of contractors would pay a fee to be able to receive their payments instantly. If you’re competing for access to great contractors, instant payments are a huge draw.
• Using automation to reduce cycle time of processing and approving invoices. Net 30 isn’t going to cut it. For our contractors here at Wingspan, it takes us six days to go from invoice to payment approved.
• Leveraging electronic payment methods (ACH) to ensure fast transactions. Every contractor has heard the “oh, the check’s in the mail” comment before when looking for their payment.

What slows a lot of companies down? Cash flow. Partnering with a payment vendor that provides working capital and advances opens up more options for getting your contractors paid more quickly — and helping you deliver a differentiated experience for your contractors. 

If speed to payment is a priority for you and your contractors (and let’s be real, it probably is), you need to be thinking about how to process invoices quickly and turn them into payments you can send directly to the contractor.

Reliability: Predictable payment schedules matter

Your W2 employees know exactly what day they’re going to get paid every single month. Do the same for your 1099 contractors.

Reliable contractor payouts mean:

• Predictable payment cycles so contractors know when they’re getting paid. Let them know up front that you pay on the 15th of the month, for example, or that you pay every Friday. Your contractors want to know when money is going to come through the door so they can better manage their finances.
• Transparency into what’s being paid and what’s outstanding. Your contractors may have variable work each month, so keeping a clear system of record that both of you can access makes collaborating easier.
• Trusted bank partners and payment infrastructure so contractors know that they’ll actually get their money in their own accounts. (Here at Wingspan, we’ve processed over $1 billion in payments — we know how important this is to get right.)

Creating a predictable payment schedule also makes it easier on your team. A repeatable process scales much more easily for your internal team members and whether you’re paying six contractors or sixty.

Turning 1099 payments into competitive advantage

Making 1099 payments more efficient isn’t just about catering to your contractors. It’s also a huge win for your team. Fewer delays and errors mean fewer emails demanding payment or weeks of back-and-forth trying to figure out where a payment went wrong. 

That’s exactly what Jimmy Daly wanted to do for his content marketing agency Superpath. He partnered with Wingspan to automate onboarding and 1099 collection to scale contractor payments to $1 million annually. (You can read the full story here.) 

And don't forget to save your seat for the 1099 NEC Track scheduled for Wednesday, August 14. We’ll be sharing guidelines for companies looking to mitigate their compliance risk when working with contractors at scale, including info on worker classification, 1099 tax filing, and more. See you there!