There are many variables to consider when managing different businesses. Perhaps one of the most important is understanding the various parties associated with maintaining your business, including vendors and contractors. For property managers, achieving cost-efficiency and turning profits is why many work with vendors and contractors. Now the question is, what’s the difference? Both words are often used interchangeably for the same parties, but there are certainly differences. Get the best ROI when hiring, and educate yourself to understand the essential services that both these groups provide. In this article, we will cover their differences, the process of hiring each, and much more.
Who’s a Vendor?
We’re going to start this off by asking this; What do you do for a living? Do you sell goods and/or services to small businesses, companies, and various individuals? If the answer to this question is ‘Yes,’ then you’re most likely a vendor.
A vendor is essentially someone who provides quality goods and services to other entities in a timely fashion. He/she will work on a long-term basis and won’t be picky when it comes down to who wishes to transact with them.
A business usually focuses on two parameters—the quality of goods and/or services and the delivery time to analyze a vendor’s performance. What we’re telling you is, if you’re a vendor looking to expand your customer base, don’t ever think about compromising these two things for anything.
By the way, this ‘Vendor’ title is not a title only reserved for individuals supplying products to different companies. A manufacturer can also be a vendor.
Manufacturers often produce goods and then sell those same goods to vendors who supply them to different entities. However, due to budgetary constraints, some business entities prefer working directly with producers/manufacturers. Hence, cutting off the middle guy.
Now, since supplies are directly procured from the manufacturer, they automatically assume a vendor’s role.
Who’s a Contractor?
Every organization has goals and objectives. To meet these goals, an organization will need a skilled workforce that knows how to get things done.
Those people are the contractors. They’ll be part of the organization for a specific duration and can leave once management signs off the task as completed.
So now you see why a contractor rarely works on a long-term basis, right? They’re usually under contract for short periods unless the organization decides to renew it.
Say you’re the contractor working on a specific project. You already know your performance rating will indicate how efficient you were while working on the tasks assigned to you. Suppose you can meet the organization’s expectations within a specific timeframe. In that case, you’ll build a good relationship. But if you’re always lagging or, for some reason falling short on the expectations, you could get yourself into trouble.
What Distinguishes a Vendor From a Contractor?
Just think of a vendor as a typical seller. They’re in the industry trying to earn a living by providing goods and/or services to willing and able buyers. In this case, the buyers are small businesses, corporates, or individuals looking for supplies needed for production.
Contractors, on the other hand, are people hired by an organization for a specific timeframe. Their main objective is to complete the tasks assigned to them in a timely fashion and meet all the other employer expectations.
But what if we’re using this period as a parameter for comparison?
We would then say the difference between a vendor and a contractor is that the former works for a more extended period because contractors usually move on to the next project once the task at hand gets completed.
Hiring a Vendor and Contractor
First, to understand the differences in hiring processes, acquaint yourself with the RFP and the RFQ documents. RFP is an acronym that stands for Request For Proposal, while RFQ represents Request For Quotation.
Companies looking to collect pricing information from potential vendors while trying to procure goods often use the RFQ document. They prefer using this document for the RFP because the information found on it is more specific. If the company wants to know the X number of goods’ price, they know they’ll get a quotation for X number of goods and not an approximate.
Something else worth noting, not all vendors who send in bids get a reply or receive an RFQ document. Only those who are shortlisted. And once they do, they’re expected to respond with price estimates that will appeal to the business’s needs.
All in all, you don’t have to be a genius to realize that pricing does play a vital role in the vendor hiring process.
Things are a tad bit different on the contractors’ side. Companies looking to procure large-scale services from contractors prefer using RFP documents. In comparison, RFPs are more complicated because they contain every small detail down to the T. You won’t just find the price estimates on that document. There’s also the contractor’s skill level, experience, and even reputation.
In a nutshell, the RFQ and the RFP documents practically define these two hiring processes. An RFQ is more appropriate when hiring a vendor, while the RFP is the best alternative for companies looking to hire contractors who can offer large-scale services.
Forms Required During The Hiring Process
Any company looking to hire you as a contractor will have you fill out the W-9 form using your SSN (Social Security Number). But to get hired as a vendor, you’ll only need the EIN (Employer Identification number).
Why’s the SSN important to the company?
There’s no company out there that wants to work with someone who’s not reliable. And that’s why they feel it’s always important to carry out background checks by using the prospect’s Social Security Number
Conversely, vendors have to provide their Employer Identification Number because it’s essential for tax filing and reporting purposes.
By the way, businesses fully understand how aggressive the IRS is while pursuing the tax system’s violations. That’s why they’ll never hire a contractor as a vendor substitute or vice versa. To you, this misclassification might not seem like a big deal, but to the organization, it is.
The primary purpose of this form is to provide the requester with your tax information. Every non-employee has to fill out the form, but that doesn’t mean that you should give anybody your TIN. It’s sensitive information, so it has to be private. Also, when you’re sending the document to the requester, make sure the attachment is secured or encrypted.
All entities have to report any compensation that goes into the contractors’ pockets using Form 1099-NEC. Here are the five essential parts that must be completed:
- State Information.
- Non-employee compensation amount.
- Recipient’s information.
- Payer’s information.
- Federal income tax withheld.
A Written Agreement
An attorney will prepare this document. It will specify what happens if the contractor or vendor delivers substandard goods and services, how a contractor should complete the assignment and the client’s assurance that no benefits will withhold.
Type of Projects Vendors Work On
To contextualize how vendors operate within the supply chain, we have to look at the different vendors’ types.
A B2G vendor is a vendor who mostly, but not exclusively, works with the government. It’s funny how most people forget that governments are business entities. They need the same services as corporations to function.
Look at the department of defense, for example. It always hires vendors who can provide military equipment or consultancy services. Successful candidates are usually people who have spent the better part of their careers in the private sector and are now trying to branch out to the public sector.
B2B vendors only work with other vendors. They’re often regarded as supportive vendors because the goods and services they offer to boost the supply chain for other vendors.
The perfect example of a modern-day B2B vendor application is Dropbox. This cloud storage service makes it easier for other businesses to save, sync, and share large files with other business enterprises without sending large attachments.
Type of Projects Contractors Work On
Ask anyone when’s the first time they heard the word ‘Contractor,’ and they’ll start talking about an HGTV show that they love or used to love watching back in the day. Those home improvement shows are why many people associate contractors, with home projects or construction.
Example of services provided by contractors include:
- Installing and maintaining heating and air conditioning.
- Installing sound equipment and fire alarm systems, etc.
Why Do People Confuse Vendors and Contractors?
Confusion usually sets in when people start using these two terms interchangeably. Just because they’re both non-employees, and offer essential services to various businesses, doesn’t mean that they’re the same.
If you’ve spotted a job listing, but you’re not so sure if it’s meant for a vendor or contractor, sign up for Ventract.
This all-in-one platform will connect you to different projects tailor-made for you and automatically send you notifications whenever a new gig pops up in your area. You’ll always be in the know, can quickly generate bids, and therefore, beat your competitors to the punch.