Whether a company needs a Freelancer Management System or a Vendor Management System for managing external resources depends on the specific requirements. Often a combination of both systems makes sense.

In larger companies, the use of a Vendor Management System (VMS) to control collaborations with service providers and suppliers is usually indispensable today. A VMS ensures transparency and security when hiring external resources, reduces the administrative effort and provides extensive data to evaluate the supplier’s performance and monitor budgets.

A Freelance Management System (FMS) basically offers the same functions as a VMS. The big difference, however, is that a FMS is usually not used to manage corporate partners such as recruitment agencies or suppliers, but individuals, i.e. freelancers or sole proprietors.

Why a VMS is usually not enough to manage freelancers

The collaboration with external service providers – whether recruiters, marketing agencies or other providers – is significantly improved by the right VMS. As a rule, companies usually maintain long-term business relationships with their external service providers, i.e. a manageable number of partners are regularly commissioned for services. This has the advantage that, over time, the VMS can be deeply integrated into existing workflows on both sides and adapted to specific needs.

When working with freelancers, on the other hand, companies usually face different challenges. In the span of a few weeks or months, sometimes several thousand different freelancers can be hired for projects. The commitment of freelancers may be required at a very short notice, take place sporadically or only once. Hiring freelancers as quickly as possible and also collecting all the necessary data in order to protect yourself from false self-employment and comply with other compliance regulations is a challenge that can hardly be mastered with a VMS.

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The advantages of a FMS compared to a VMS

A VMS supports longer-term or regularly recurring collaborations with a manageable number of external partners. On the other hand, a FMS allows for the fast and possibly even one-time assignment of a large number of external, independent individuals.

A Freelancer Management System supports companies in the following areas:

  • Fast and legally secure onboarding of freelancers
  • Building and managing a talent pool with all the important information such as contact details, contracts, professional qualifications, work histories, etc. in one place
  • Easily procuring resources and placing orders with talent pool freelancers
  • Direct communication and project collaboration
  • Automated invoicing, simple invoice approval and payment

With the support of a FMS, the collaboration with freelancers becomes possible on an individual level. This means that individual departments or project teams within the company can assign and manage freelancers independently of the HR department, without it resulting in transparency gaps. Thanks to the central storage of contact data, contracts, invoices, etc. in a FMS, all relevant departments of the company have access to the required information at all times.

While project teams are likely to use a FMS primarily to look for suitable freelancers and collaborate with them on projects when needed, the value of a FMS for the human resources department in particular is to have an overview of which external partners work for the company and which contracts have been completed. Additionally, a FMS offers the accounting department an overview of all costs involved in working with external staff and saves time when processing invoices.

How freelancers benefit from a FMS 

In many companies, working closely with freelancers has become an indispensable part of staying competitive. In some industries, such as the IT sector, there is even a real fight for the best specialists. Here freelancers can choose their clients almost freely. The competition is usually won by companies that not only offer their freelancers an attractive compensation, but that are also very convenient to work with.

A FMS offers freelancers many functions to ensure a smooth collaboration with companies. Of course, the first thing to think about is an uncomplicated payment process. Nothing annoys freelancers more than having to remind companies to pay their invoices for weeks or months on end. With a FMS, you can not only create invoices quickly, but also rely on punctual payments thanks to an automated processing on the company’s side.

In addition, the advantages of a FMS for companies apply equally to freelancers. They have access to all contracts and other agreements, the commissioning is fast and follow-up orders can be realized even faster. Via a FMS, the right contact persons can be contacted without any detours and the possibility of continuous communication during the project avoids misunderstandings regarding the order requirements.

Combining a VMS and a FMS has many advantages

Working together with service companies and freelancers on a regular basis does not mean that two different management systems need to be applied. On the contrary, it is usually much more useful to use a combined system. However, this system must meet the specific management needs with regard to service companies on the one hand and freelancers on the other hand.

It should be made sure that

  • The system can be integrated into existing processes without much effort
  • Freelancers can be commissioned both directly and via agencies
  • It is possible to organize all external contacts in a database to find suitable candidates for orders as quickly as possible
  • The system supplies all departments with the information they need
  • The system can be quickly adapted to changing legal or strategic conditions.