Be honest — are you using Venmo to pay contractors?
I know, I know, Venmo is easy to use and it’s fun to explain your transactions with emojis. But it’s not an appropriate way to pay your contractors.
Honestly? Pretty much any other payment option is a better choice than Venmo.
So let’s talk about what those other choices are so you can decide which one is best for your business. I’ll cover invoices, PayPal, and how to keep your documentation straight no matter which one you use. Let’s get started!
There are many reasons that Venmo isn’t the best choice for business transactions, and one of my clients is the perfect example. Sadie (name changed) was using Venmo for all of her business finances. Her clients paid her that way, and then she’d Venmo payments to her contractors. And then she’d just transfer her Venmo balance to her business bank account.
But the problem was that she didn’t have a good way to keep track of each individual payment. By the time she was transferring money into her bank account, there wasn’t any information showing how much each client paid her or how much she paid each of her contractors.
When it came time for her to do her taxes and create 1099 forms for her contractors, she was scrambling to figure out how much she paid everyone over the course of the year.
As long as your contractor payments are less than your income, does it matter what the actual amounts are? Absolutely!
Here are just a few reasons to track your payments:
You can’t just run your business on approximate data or trust yourself to remember the amount of an invoice six months from now. You need to keep a paper trail of invoices and receipts so you always know what your finances look like.
No shade to Venmo — it’s a perfect way to split a dinner bill with friends or pay your roomie back for the groceries they picked up for you. But it’s not right for official business transactions, and here’s why:
Now, there is a “Venmo for Business” option that’s more official. You’ll have to pay processing fees for payments, but there’s more protection for you and your contractors. However, I think there are better payment services for businesses.
So, what are some good options for paying your contractors?
Basically, you want to pay your contractors through official channels and keep track of all those transactions.
When you have a reliable, trackable process for paying your contractors, it makes things so much better! It’s easier to do your bookkeeping and prepare for tax season every year. Plus, using a reputable payment provider makes your business look more legit.
If you’re using a spreadsheet for your bookkeeping, make sure each contractor payment is clearly marked with the amount and the payee’s name. When it’s time to create your 1099s, you can just filter by name to get the total amount you paid each contractor.
If you’re using an accounting program (like Xero), the process is similar. Make sure each payment includes the contractor’s name so the program can automatically calculate the total yearly payments for each payee. Most accounting programs will create 1099s for you too!
What do you get when you work with me and my team of bookkeepers?
Interested in that kind of support for YOUR creative online business?