Many enterprises find it more cost-efficient to fulfill their creative needs by hiring freelance programmers, graphic designers, event planners, writers, editors, photographers, etc.

The advantages of using freelancers are apparent. Enterprises only pay for the services they need, which often aren’t enough to justify a full-time position, particularly for small to medium-sized businesses. Using freelancers also can have tax advantages, while avoiding the heavy cost of employee benefits. And sometimes freelancers are essential in filling in staffing gaps during periods of heavy activity.

But there are risks involved with using freelancers — risks that grow in proportion to the number of freelance contracts an enterprise is engaged in. Keeping up with one or two freelancers doesn’t present a tremendous challenge, but when an enterprise begins using multiple freelancers, contract management becomes significant. Without sound contract management, mismanagement of freelancers can lead to escalated costs and off-track projects.

Contract management software can reduce these risks by facilitating the necessary level of freelancer oversight.

Following the Rules

A recent Tip of the Day on Time Business & Money, “Managing Freelance Help” addresses the need for diligent tracking of the compensation and management of freelancers.

“The IRS may consider your freelancer an employee if you require them to work on site or put in regular hours, if you pick up the cost of their expenses or benefits, or if you require mandatory training. Break the rules and you could be on the hook for the cost of Social Security, overtime and penalties,” the article warns.

These rules are designed to prevent employers from claiming freelance status for people who are in essence regular employees, but they can trip up well-meaning enterprises that aren’t paying attention to the IRS guidelines. By providing alerts whenever a particular activity falls outside the scope of the IRS’s definition of freelancing, contract management software can assure that everyone who deals with freelancers is paying attention.

Controlling Costs

When working with freelancers, it’s crucial to control the scope of work on each project by being precise in your contract language. Enterprises should leave no doubt about which services they’re responsible for, and there should be a set budget that a freelancer can’t exceed without prior approval.

Conditions (i.e., deliverables due, deadlines) that the freelancer must meet for satisfactory completion of the project — as well as the consequences in case of non-compliance — should be unambiguous.

But even with ideal freelance contracts, managing multiple freelancers without contract management automation can easily lead to the allowance of charges beyond the agreed-upon scope, as well as failure to claim available discounts for unmet conditions.

Keeping Projects on Track

For complex projects, or projects that are coordinated with other freelancers or internal resources, it’s usually not enough to simply define the deliverables due for project completion and set a completion deadline. Frequently, deadlines also need to be set in the contract to keep projects running smoothly and avoid project delays.

Contract management software can assist with freelance project management in numerous ways, including scheduling, contract creation to ensure deadline compliance, and automatic reminders to freelancers and internal project managers of approaching deadlines.

Paying on Time

Contracts are, of course, a two-way street, and enterprises are obligated to the payment terms agreed upon in their contracts with freelancers. Freelancers will charge allowable late fees. Enterprise contract management software that’s integrated with an enterprise’s accounts payable system can avoid these fees by ensuring that freelancers are always paid on time.

Takeaway

For enterprises managing a pool of freelancers, enterprise contract management software can make the task easier and more-efficient.