Getting Paid as an Independent Contractor
I just read Elizabeth Dwoskin’s New York Times article on the challenges freelancers can face in getting paid. It is tough to read because she profiles two stories where non-payment causes significant personal hardship. In one case, Romulo Saldana collected $34k in IOU’s for back pay over the course of five years working in construction. So, with $34k less to spend, he made hard choices. He wasn’t able to send money home to pay for his teenage daughter’s middle school or pay for a caretaker for his 90 year-old father.
Historically, we’ve talked a lot about how OnForce’s innovative model helps buyers deliver high quality services at substantial cost savings vs. alternatives. It’s a great value proposition that allows service buyers to pay for IT or CE work 1 hour or 1 job at a time anywhere in the US or Canada with whatever skill set is required…. but it only works because there is a two-sided value proposition. If service providers aren’t excited about the value OnForce brings then the service buyer value would disintegrate. Both sides have to work.
So, what does this have to do with Elizabeth’s article? Well, while I was reading I couldn’t help but think about the benefits OnForce delivers to our service providers. There are three that are top of mind:
- OnForce guarantees payment to service providers. Elizabeth highlights how hard it can be to get paid and in the end, smart contractors have to price non-payment risk into their work.
- OnForce pays fast. Because of OnForce’s innovative model payments get delivered fast – this quarter we’re averaging 52 hours after completion of the work order. I know lots of small businesses that dream of getting paid in 52 days.
- When problems do occur and a payment gets delayed, OnForce has a team of people focused on getting to resolution quickly. Our platform software is very effective at making almost all transactions happen without incident, but sometimes, we need to intervene. Often a service buyer needs a part returned or some other follow up before they can release payment.
Really, the issue of non-payment or late payment is huge. It’s not just an unscrupulous business owner here or there – from what I’ve seen, that’s the small part of the issue. There are real economic issues that make payment issues common.
- Cash Flow: Obviously, this economy has exacerbated the issues with many businesses struggling for cash flow. The business you are contracting with is probably struggling with cash flow because some of the companies they are doing work with are slow to pay them. Even though they might be making a good margin, and have a theoretically healthy business, they can still run into real dry spells when it comes to cash. Another surprising reason for cash flow problems is growth. Winning new business is great, but it often requires up front investment that doesn’t pay back right away. Too much success in the form of new business can cause real cash flow problems.
- Bandwidth: Tied to the issue above we’ve seen companies working to make due with fewer employees. Too many companies had to lay people off in the last couple of years and this makes them hesitant to build up a big workforce again. One thing we see is an over-stressed accounts payable function that can often lose track of a stray invoice that needs paying.
- Lack of organization: Small businesses are often started by entrepreneurs who are excited about their business, not the drudgery of the finances of their business. I’ve visited many small businesses where the owner was a brilliant carpenter/ trucker/ technician/ lawyer… but upon inspecting the mechanics of the business I found complete disarray.
For all of these reasons, good people at good companies struggle to pay on time. The ability for an individual to set out on their own and create a business is an essential part of our economy and only getting more important. These payment issues are a drag on productivity that will continue to hinder our economy. It’s fun working at a company that is building an innovative product that makes a difference on an important problem for so many independent contractors out there.
December 20th, 2010 at 4:19 pm
I’ve re-written this 5 or 6 times, now, because my tone turned angry and resentful.
From my position as a small business person, running my own business, I can agree with your statements that small businesses are going to have issues with cash flow, will make more mistakes on paying invoices and all the other things that can impact payments for services rendered. That is, in part, why a portion of my business is done on the OnForce platform.
However, the platform is starting to fail me. I never joined up with the idea my business would survive only on platform generated income. What I did expect was a platform where I could grow my business, learn tactics for conducting business and learn market value of my 20 years of experience in the industry. The only value I am getting from OnForce is learning how to say ‘No’ and how to ignore those opportunities that are not in the best interest of my business and growth.
In the last year, a new term has become a common addition to my vocabulary. That term is ‘pizza tech’. The industry has become so over-ridden with the Craig’s List low-rent, low-quality ‘providers’ that honest business people can not make a reasonable earning on the work orders posted on your site.
Professionals are not recognized as such. Even difficult to attain certifications, such as my RHCE, are not recognized by OnForce, but memorization only certs such as the A+ are recognized as a professional certification. The CompTia certs are being taught in High Schools. Is this really the level of professionalism end users expect?
So, this brings me to a few simple questions I hope you are able to respond to.
Does OnForce still want to be a leader in connecting professional service providers with businesses in need of service? If so, what can we professional service providers expect OnForce to do to attract buyers who need experienced professionals and are willing to pay for that premium of experience and professionalism?
Thank you for your response.
Sincerely,
Daniel Curry
Provider ID: 118082
December 20th, 2010 at 5:06 pm
Daniel,
First off, thanks for taking the time to add the comment (and to do the re-writes). From your experience it sounds like the buyers who are routing work orders to you are only looking for entry-level skills. I can understand how it would be frustrating to get offered low prices on entry-level work when the market value of your experience is much higher. Once you’ve built up a significant base of skills and experience, it just doesn’t make sense to do the simple stuff anymore if you have enough opportunity to do the higher-level work. It’s not challenging and it doesn’t pay well.
I’d like to suggest that we get you on the phone with one of the people on our pro community team to talk about your profile and the opportunities in your area and to see if there is anything we can do to get you opportunities more suited to your interests. Also, please share more about the RHCE so that we can see if it’s appropriate to add to our list of certs. If you’d like to have that conversation, DM me on Twitter and I’ll set it up.
December 21st, 2010 at 3:16 pm
You state in your blog:
“OnForce guarantees payment to service providers.”
This is in direct conflict with what OF states in the “Service Buyer’s Satisfaction Guarantee”:
“If you are dissatisfied with the quality of work delivered by a service professional, you must escalate your dissatisfaction to the OnForce Market Support team PRIOR to approving the work order for payment. Our Market Support team will work with you to determine the necessary steps to ensure the successful completion of your service event. While every case will be different, rest assured that you will remain in complete control regarding the ultimate payment to the service professional.”
What gives?
December 21st, 2010 at 5:36 pm
Todd, good catch. Since OnForce serves as a marketplace where we connect the service buyer and the service provider it is set up so that the buyer has an opportunity to agree that the work is completed satisfactorily before payment. That’s an essential part of the transaction and consistent with any typical independent contractor agreement. What I meant is that because buyers fund work orders before the work is complete, we don’t run any payment issues when work is successfully completed and free of disputes. What I described in the post was the normal scenario. It is a very rare work order that ends up in dispute and something we try hard to minimize. Thanks for the catch.
December 24th, 2010 at 1:02 pm
Again to add to the point
“OnForce guarantees payment to service providers.”
Onforce guarantees payment, but apparently that includes payment of $0, as with a work order in which I followed the establised procedures and Onforce closed the Work order for $0.
December 30th, 2010 at 3:35 pm
Jeremy,
Thanks for bringing this one up and thanks for the offline conversation. After reviewing the notes on the dispute we decided to have OnForce pick up the bill on this one and pay out the work order at the original amount. Sorry it took us a while and thanks for your support.