How Freelancers Are Shaking Up Corporate Spend

The sharing economy has changed the way consumers operate today, and these impacts are making their way to the enterprise crowd. On-demand delivery services, corporate adoption of Airbnb and Uber, and emerging services that range from bringing catering to the office to hooking up companies with last-minute inventory storage mean consumers aren’t the only beneficiaries of this diversifying world.

But there are implications the sharing economy has on enterprise that are less obvious.

According to new analysis from freelancer management system platform Field Nation, the employees that fuel the sharing economy – freelancers – are changing the way the Chief Procurement Officer function operates in a corporation.

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In a recently published e-book, Field Nation looks at how the proliferating freelancer segment in the U.S. is forcing the CPO to take a new look at how procurement teams access the tools and services they need. The report suggests that corporations are beginning to take the freelance and on-demand economy seriously as a source of B2B services.

But separate research highlights the struggle many freelancers face when they look to get paid by their corporate clients. The findings could signal that while CPOs are taking the freelance economy seriously, their AP departments may be struggling to follow suit.

Growing Numbers

Field Nation pointed to research predicting that 40 percent of the U.S. workforce will be made up of freelancers by the end of the decade. This growing population means businesses in need of services can no longer ignore these on-demand options.

“The legacy managed service provider or staffing firm whose only value-add was a large Rolodex and the ability to supply a warm body has been thoroughly disrupted by the new labor supply chain,” the corporate stated. Now, cloud-based platforms give businesses – and their procurement teams – access to freelancers based on expertise, location, cost and more.

According to Field Nation, the emergence of these platforms coincides with the demand among enterprises to outsource non-core functions of their business.

With demand on the rise, and with freelancers becoming a more normalized part of the economy, CPOs are turning away from vendor management systems for solutions that not only provide freelance work, but also provide the data necessary to optimize corporate spend on these services.

But the expanding freelance market has also led to new challenges for CPOs and their companies’ accounts payable department.

Payment Woes

According to research recently commissioned by freelance marketplace platform Upwork and performed by Censuswide, a survey of freelance workers found that 81 percent have been paid late by their client – a number that declines sharply when freelancers use a platform to find work.

Researchers also found that 48 percent of those surveyed said these late payments have left them with cash flow problems, and that the freelancer, on average, spends 30 hours a year tracking down their outstanding invoices.

Analysts at Field Nation noted that as the volume of freelance workers on the market continues to grow, CPOs and purchasing officials at corporations will need to start thinking of the freelance and on-demand economy not just as a potential fallback plan, but as a primary source for their needs.

“Purchasing and procurement teams must start pulling the contingent workforce budget line items out of departmental lump sums and start making it part of the strategic discussion because now, for the first time, it can be part of that discussion,” Field Nation stated.

But while freelancers are now operating as their own independent businesses and striking more professional deals with corporate clients, that professionalism may not yet have penetrated the AP department, signaling a potential opportunity for innovators to fill the payment needs of this emerging population of B2B service providers.