Do You Actually Need Vendor Management for Your Next Gig?

So you got a gig that you’re pumped about, but you need to hire some help. Do you actually need to have some vendor management in place for your next gig? The answer is yes. Below you’ll find all the information you need to make sure your business is compliant and your next gig is successful.

What is Vendor Management?

When you hire someone, who is not an employee, to do any sort of work for you, that person is classified as a vendor. This can be an assistant that you hire to help with an out of town gig or it can be the cleaning company you hired to give your studio a deep clean. Either way, the rules are the same.

And they need to get paid. But there’s more to it than just sending them a Venmo payment and calling it even. Actually, please don’t do that. It’s super against the rules.

Why is it important?

So why does it matter? Because the IRS says it does. There are rules and regulations in place to make sure that income gets reported accurately. So whenever you pay someone to do a job for you, you have to do your part in reporting that income. This means gathering the proper paperwork and then filing what are called 1099 reports in January of the following year.

And I don’t know about you, but I can barely remember what I had for breakfast, I’m definitely not going to remember every single transaction across the entire year. And I’m guessing you won’t either. That’s why it’s important to have a paper trail – receipts, invoices, documentation – about what you purchased and why.

What is vendor invoice management?

When you hire a vendor to do work for you, they should send you an invoice for that work. The responsibility is actually on THEM and that’s a good thing. They are their own business (yes, even freelancers) and they need to be responsible for recording their own income (and billing you for it). The terms of the invoice are up to THEM. They can require that you pay them immediately, in a week, a month or even up to three months. They may want a credit card payment or a check or a zelle.

You can always suggest a different method of payment, but ultimately, they get to pick. If their request doesn’t work for you, guess what? You don’t have to work with them.

No matter what their invoice says though, you are responsible for meeting the terms of the invoice. Which means that you need to pick a method for managing invoices and stick to it.

You can use Quickbooks Online (my favorite), Bill.com, or another platform that you like. Just make sure you stay consistent so you know what has been paid and what hasn’t.

What is vendor management process?

Whenever you agree to work with a new vendor, whether it’s for an extended gig or for one day, you need to collect a form W9. I’ve linked a blank one for you here. This ensures that you have all the proper tax documentation to be able to issue a 1099 at the end of the year.

You may also want to implement a contract of services that outlines deliverables, expectations, payment terms and how to terminate the contract if needed.

If you and your vendor agree to ACH or direct deposit payments, you’ll want to gain authorization to deposit to their bank and you’ll need their routing and account number to do that.

If you’re going to have a relationship that spans multiple payments, you may want to consider setting up an auto payment to them via credit or debit card so that you know when that payment will be coming out of your bank each month.

TL, DR:

• Vendors are just people you pay to do stuff for you.
• Before you pay any individual or small business (this does not apply to corporations, you can still shop at Amazon without worrying) you need to collect a W9 form. This gives you the tax information you need to send them a 1099 in January.
• Make sure the vendor knows they should send you an invoice for their services. Keep the invoice filed in your preferred location.
• You can pay them via your preferred method, but just try to avoid Venmo puuuuleaz.
• If it’s a service you’ll use monthly, consider setting up an autopayment option so you don’t have to think about it every month.

All in all, yes you need to have vendor management practices in place for every gig. It’s so important to keep your business running smoothly and avoiding your accountant’s wrath during tax season. Put this in place and you’ll be their new favorite client.

Feeling overwhelmed? It’s a lot, but we can help. Check out our bookkeeping services for creatives in the music industry services here.