As the number of content creators worldwide surpasses 300 million, the demand for efficient financial tools to ensure timely payouts has skyrocketed. The influencer marketing landscape involves various stakeholders, payment methods, and payment terms, making it crucial to address common challenges in the payout process. These challenges can be vendor onboarding, sensitive information handling, payment and deliverable management, tax compliance, and accounting software integration.
Different platforms like Meta, TikTok, Snapchat, and Apple Podcasts offer monetization tools for content creators, while brands pay the creators to promote products or services through sponsored posts and partnerships on social media platforms. Payouts can be made via PayPal, Stripe, Gigapay, bank transfers, or creator funds, with payment terms varying from upfront to 30, 60, or even 90 days.
In this blog post, we'll explore the challenges in the influencer payment process and provide solutions to ensure a smooth and efficient experience for all parties involved.
Creator Vendor Onboarding
Onboarding a new vendor is a time-consuming process. Between collecting personal details, and tax information, doing the KYC, and managing communications amongst internal and external partners, this process can take 3 weeks to 6 months to be completed.
But, wait! I am working with hundreds of influencers per campaign. Is that the time it takes per creator onboarded? 😰 Yes.
This is where onboarding creators become an incredibly complex operation. Influencer marketing campaigns can require hundreds of influencers globally, some of them doing a one-time collaboration.
Using legacy accounts payable, can help the process but you will still have to spend a lot of time and resources on all creators onboarded. Adding to this pain, your relationship with the creator may be compromised when they get to know that it will take a long time to get paid.
For the businesses working with creators, the ideal solution would be to significantly reduce the time spent and allow them to onboard as many creators as needed in a matter of seconds, by streamlining this process.
Creator Invoice Management
Invoice processing can be a cumbersome process, with no industry standardization. For businesses processing more than 350,000 invoices a year, exceptions cause 32% of late payments, and 36% of related phone calls, and have required the equivalent of 79 full-time employees’ time to solve them.
If you are working with a high volume of influencer partnerships, there is a big chance that you deal with the following mistakes regularly:
- Wrong rate;
- VAT is not correct or missing;
- Wrong purchase order number;
- Wrong personal details;
- Missing information;
- Wrong invoice format.
When dealing with just one invoice, these mistakes might not look so painful, but they can add up the time spent when dealing with hundreds of invoices. If we average the time spent around 7 minutes per correct invoice, you can expect to spend 12 hours per 100 invoices. And the pain doesn’t go away after paying the invoices. Accounting will still have to bookkeep all the invoices which account for 15-40 hours/week, depending on the volume of invoices.
Fortunately, there is a solution to these common invoice processing problems that businesses face when dealing with a high volume of influencer partnerships. By implementing a system like Gigapay that allows companies to control the rate sent to the influencer and guide them to add the correct information to the invoice, you can cut the average of 7 minutes per invoice to 90 seconds. In addition, this system consolidates the invoices, making bookkeeping a simpler and faster process.
Cross-border Tax Regulation and Compliance
It is a tough ask for companies to ensure they are paying influencers in a way that meets regulations around the world. Not following those regulations can result in high fines and can hurt the business' reputation in the long run.
Larger corporations have an easier time adapting to the ongoing changes in regulations, but that is not the case for smaller corporations that have fewer resources. And that makes sense when businesses must:
1. Stay on top of paperwork and tax forms
Companies need to understand the employer status when paying influencers and issue relevant paperwork and tax forms according to local laws. For instance, if the formal thresholds are met, US businesses should collect W-9 IRS forms from US-based creators and W-8BEN IRS forms from non-US residents.
Regulations vary in different parts of the world, such as the need to define who is responsible to pay social contributions in the Netherlands. Companies should also establish terms and conditions that outline their relationship with each influencer, including remuneration, expectations, intellectual property, and transparency of the company/creator relationship in public posts.
2. Secure personal data
To build a relationship with an influencer and ensure that the payment is done legally and compliantly, businesses must collect personal data such as addresses, bank details, TIN, and other relevant information.
As with any corporation holding personal data, companies working with influencers are subject to local and regional privacy regulations, like GDPR in Europe. These regulations overlap and apply to influencer marketing for good reason. By holding personal data, agencies can be a target for hackers on the hunt for information to identity theft.
Each country has its advice for companies to prevent a security breach. GDPR recommends encryption of all devices because “if your data is encrypted and there is a breach, the data will be illegible and useless.”
3. Stay on top of the ever-changing regulations
There are 193 countries in the world, which means that there are a minimum of 193 different sets of regulations to be familiar with when handling influencer relationships globally.
It is not always easy to collect the information needed, so companies have to subcontract compliance consultants to help with the research, spending money and resources on information that needs to be revised regularly. This can be a roadblock when companies want to expand and start collaborating with influencers in new markets.
The hassle of guaranteeing that compliance follows company expansion is what motivated the development and integration of the Compliance Engine into our influencer payout solution. This engine checks over 160 variables that our team of experts in compliance and legal matters keeps updating with the latest regulations to pay influencers.
Cash Flow Management
Cash flow management is a crucial aspect of running a business, involving tracking and optimizing the movement of money in and out of the business to ensure positive cash flow.
To grow your business, cash is king. Therefore, you need to make sure that you keep enough money to pay your expenses whilst investing in your growth. And it is not an easy task, 82% of companies fail due to poor cash flow management.
Applied to influencer marketing, cash flow management usually translates to delaying the influencer partnership payment from a couple of weeks to a couple of months (some of the influencers in our community have reported up to 6 months!). Although beneficial to the company, taking this long time to pay your influencers can quickly go from a measure “ad hoc” to a “rant video trending on TikTok”.
The solution can be to find a financing option that allows you to pay the bill when it is more convenient for your business without impacting your relationship and payment to the influencers. For a small fee, you can maintain good cash flow management whilst investing in your business’ growth.
Assuming that you cleared all the above, it is time to send the payouts to the influencers. There are multiple ways to send the payouts: bank transfers, wire transfers, creator funds, online payment platforms, and others.
The most popular way for businesses with a high volume of payouts is to use an online payment platform. The process usually looks like this:
- Sign up for the platform;
- Connect your bank account or credit card;
- Wait for your account to be authorized;
- Start sending out direct payments across the globe.
Here are some of the most popular payment platforms in the market right now:
PayPal operates in over 190 countries, supports 25 currencies, and offers a variety of payment methods including global ACH, credit and debit cards, and bank wires.
A basic account with PayPal is free, while a business account starts at €30/month with a fee of 3.49% +€0.49 per transaction.
Stripe is an online payment processor that provides custom APIs for e-commerce brands and mobile apps. It allows businesses to accept payments in over 135 different countries and in multiple currencies. Stripe also integrates with various finance apps.
The cost of using Stripe is 2.9% plus a 30-cent fee per transaction, and there are additional costs for customizing the platform further.
If you want a solution that makes paying influencers a seamless process, Gigapay is the right choice for you. Gigapay is an accounts payable automation especially tailored for the creator economy. It allows businesses to:
- Onboard hundreds of influencers in seconds;
- Consolidate hundreds of invoices into one;
- Scale their business without being worried about compliance;
- Optimize their cash flow;
- Instantly payout their influencers in all the major markets.
The cost of using Gigapay depends on your needs. Book a meeting with a growth strategist to tailor the experience to you.
The influencer marketing landscape has expanded rapidly and, with it, the demand for efficient financial tools to ensure timely payouts. To make good use of this high-performing marketing channel, businesses must find new ways to streamline their processes, so they can spend more time creating and strategizing and less time guiding influencers through tax forms and double-checking invoices.
Insights from our experts
Keep yourself updated with the latest news, insights and strategies about the finance side of the Creator Economy
From disclosing brand relationships to country-specific regulations, learn how to stay compliant and avoid potential penalties and fines.Read more
Streamline your influencer payments with Gigapay. Discover how this platform simplifies payouts in influencer marketing.Read more