Most large corporations do a terrible job when it comes to paying freelancers on time. And I think they actually do not realize that the worst offenders miss out on talent. Unlike large design firms (established agencies and “design farms” in emerging markets), an independent freelancer has limited ability to scale up and if she is good, will be 100% busy. Project selection large happens based on how interesting the work, and how fun the client is.
Why are big corporate such a pain when it comes to paying freelancers?
- Large bureaucracies rely on rules and checks to control spending leaks (rogue employees going of and buying stuff without permission). And it is very cumbersome to have multiple sets of rules: the easiest way is one policy for all suppliers, ranging from the giant multinational all the way down to the individual freelancer
- These same IT systems have made it easy to manage numbers, key performance indicators. Often an important KPI for the purchasing department is days payable: if you get the bring the average up by even a bit, you have demonstrated progress.
- For the average supplier (stationary, lunch meals, cleaning services, car fleets) big corporates have a lot of value (and hence bargaining power), and suppliers will take the hit (and factor it into their pricing)
- Big corporates get the same treatment from their big corporate customers
- Because of the purchasing IT system, decision makers can blame everything on IT. “I want to pay you, the system just does not let me”.
Why should freelancers be treated differently?
- Freelance staff are closer to employees than suppliers of stationary. Usually, employees get paid promptly.
- In transactions from big corporate to big corporate, one order does not mean that much. For a freelancer, one project can be a month of income.
- Freelancers usually work on very dynamic projects and are usually (required to be) extremely flexible: last minute changes, weekend work. The stationary supplier does not have to deal with this and can plan everything way ahead. You want your work done quickly, you should settle the bill quickly, it goes both ways.
- Freelancers don’t have the administrative power (= people in the accounting department) to chase payments, PO numbers, invoice numbers. Freelancers work on verbal agreements (“sure I will do that by tomorrow”), it is not fair to hit back later by claiming they did not file the PO number in time.
What can be done?
- For smaller projects, many of my clients expense the project cost on a corporate credit card (the one they use for travel expenses), and recoup the cost later. This puts the responsibility back with the decision maker
- Ask about payment policy before you enter into a project, if it sounds difficult, move on as a freelancer
- As a decision maker / buyer of freelance talent, clear the ground and help your freelancers by removing obstacles in the bureaucracy. One solution is to put in a big annual purchase order which is paid by actual hours or projects put in.
- (Here is another approach by a Dutch cartoonist: a public Twitter / cartoon campaign, not everyone will be able to pull this of though)
In general, I think corporates should create a separate purchasing track for paying freelancers. It will pay of through the quality of talent that a company gets access to.
Cover image by Fokke & Sukke, highly recommended cartoons if you can understand Dutch