Contractor Onboarding Made Simple: A Guide For Accounting and Finance Pros

Bounced payments. Double invoice numbers. Extra zeros.

When your company runs on 1099 contractors, mistakes like these can be catastrophic.

Onboarding 1099 contractors and W-2 employees looks fundamentally different. With W2 employees, it’s a straightforward, one-time event. But with contractors, their work can be intermittent. You may need to re-verify their credentials or bank account information — and it can create some pretty messy administrative challenges.

For finance and AP professionals managing the onboarding, payments, and compliance for hundreds of independent contractors, the pressure has never been higher. Over the course of my fifteen-year career in accounting, I’ve onboarded hundreds of contractors.

I chatted with David Henry, Head of Marketing at Wingspan, to talk through how brands can streamline 1099 onboarding and verification. You can watch the entire session here, or read on to get the recap.

(Pssst…this is part one of a three-part series on the contractor lifecycle. Sign up here to attend our sessions on payment and compliance happening later this quarter.)

Traditional HR and AP systems aren’t built for contractors

Onboarding contractors using traditional HR or AP systems don’t usually work well.

That’s because they’re not purpose-built for contractors. 

They’re purpose-built for employees. (And they’re great at that!) Some systems will allow you to ask for a W9 instead of a W2, but they don’t get much further than that.

This leaves accounting teams two options to try to stitch together contractor management:

1. Using a legacy payroll system that’s built for W2 employee benefits and payroll 
2. Working with account payable automation systems that manage invoicing and vendors

This can work if you’re only onboarding one or two contractors. But what about businesses that run on thousands of them? 

Contractor management requires a separate set of capabilities that are patched over with human intervention. From the signed contract to details like the employee TIN and license verification, there’s a long checklist of items that accounting and finance teams need to make sure are exact. 

I used to use a spreadsheet to track everything from two different systems. 🤯

Mix in different types of contractors with different requirements and let’s just say…it got complicated very fast. The result is that it takes companies days — even weeks sometimes —before they can get their contractors onboarded. This is a big problem for these companies that need to move fast and capitalize on surges in customer demand. 

How to streamline contractor onboarding

Contractor onboarding doesn’t have to be the administrative mess that most accounting teams have to deal with. Here’s how to streamline your contractor onboarding:

1. Automation: Manual processes just slow everything down and create too many opportunities for error. Automate the process as much as possible, whether that’s realtime TIN verification, automated payment notifications for contractors, or creating recurring invoices that automatically go into your system each month.

2. Standardization: No one wants to create red tape, but there’s something to be said for creating a repeatable procedure for onboarding contractors. Create a packet template that you can send to each new contractor that contains the W9, a blank ACH form, invoicing instructions, and whatever other information your team needs to get them into the system easily.

3. Self-service: The last thing anyone in finance wants to do is be a ticket manager. Make it easy for them to submit changes to their personal information. Have only one way for a contractor to get a hold of someone in the company to streamline this. In the past, I’ve created a specific help desk email address for contractors to use so someone from our team can quickly get eyes on an issue.

3 common contractor onboarding mistakes to avoid

To make onboarding work with multiple contractors, you need a single source of truth. Trying to juggle two or three different systems that don’t talk to each other while handling sensitive information like banking details or SSNs create plenty of opportunity for mistakes from even the most diligent accounting folks. 

The three most common mistakes that I’ve seen (and made!) include:

1. Mis-payments because of intermittent work or rate changes
2. Bad banking information because of manual errors from contractors or from accountants with the wrong invoice number or banking details
3. Inaccurate W9s that are missing key pieces of information or details to complete compliance and payment

When a mistake like this happens, it creates issues on both sides. Contractors are wondering where their money is, all while finance teams are scrambling to call the bank or triple-reviewing information every month. 

It’s a huge headache.

Accounting and finance teams working with 1099 contractors need software that’s purpose-built for them. Wingspan can automate, standardize, and offer self-service for your onboarding process so you can stop stitching together multiple systems and start crushing the rest of your (very long) to-do list.

Take a look at how easy onboarding can be in our new interactive demo.

And don't forget to save your seat for the Payments Track scheduled for Wednesday, July 31st, see you there!