10 Quick Tips to Improve Your Invoicing
There’s a lot of fun and exciting perks to starting your own business. Bookkeeping is not one of those. New business owners often underestimate the time and stress it takes to just get paid.
Here are some tips for how to make getting paid a little less painful:
1. Develop an accounts receivable process
Decide how you’re going to track your work, how soon you’ll invoice customers, how soon you expect to get paid, and after how many days you’ll follow up if an invoice is still unpaid. Figure out what invoicing app you’ll use or there are also a few super simple bookkeeping applications you might try.
2. Establish payment terms and stick with them
You don’t have to have the same payment terms for every client, but you need to establish whatever terms you have right at the beginning of your discussions with the client. If you say a 50% deposit is due before you’ll start any work, then don’t start working until you get that deposit. Don’t be afraid to be firm. Your client will respect you for it.
3. Don’t wait to send the invoice
Send the bill when the value of your work is still fresh in the mind of your customers. They need to feel the value of your work when they see the cost.
As work progresses, invoice in stages and detail that schedule to the client prior to billing.
4. Require a deposit
It’s a fairly standard business practice to ask for a deposit prior to starting any work. You may even want to have your customer’s credit card on file just in case.
5. Break a big invoice into “stage billing”
As work progresses, invoice in stages and detail that schedule to the client prior to billing. A big bill is easier to digest in small bite-size pieces. Your client might appreciate the option to make smaller payments over time rather than paying one lump sum.
6. Make a phone call
If your client is late on an invoice, just call them! A phone call is more personal and can soften the issue, whereas email can be taken the wrong way. Use this phone call as an opportunity to strengthen the relationship with your client.
7. Be clear in your communications
State your rates, due dates and any other expectations clearly and in no uncertain terms. Ask your client if they have any questions. Use “as quoted on” or “as per our email on” with dates in the event that your client “doesn’t remember” agreeing to something.
State your rates, due dates and any other expectations clearly and in no uncertain terms.
8. Include your payment terms on every invoice
Let your invoices be a constant reminder to your clients of what your payment terms are. Review these yourself every so often so you know what you need to follow up on.
9. Charge interest or late fees on overdue invoices
Don’t be afraid to penalize clients for not paying you on time. Interest and late fees motivate people to pay you when they’re supposed to.
10. Help them out
Offer to make payment arrangements if they are having difficulty paying. Oftentimes, the ego will kick in and they pay because they don’t want to look like they can’t afford to!
Invoicing and bookkeeping isn’t always fun and so it’s often the source of procrastination. Be warned that if you don’t already know it, cash is king, and cashflow is the lifeblood of your business. No money? No business…
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What charge interest should we apply? What’s the common interest in overdue invoices? Thanks.
Usually it’s a % of the total amount due. I’ve see anywhere from 30% to 10%. I’d say 10%-15% is standard. At the end of the day, collecting the late fee kinda sucks, the client won’t like it either. You really just want them to pay on-time/quickly and never get to that point of having to add late fees. One of the hardest things in business is being tactful.
I have the same doubt, what is a reasonably interest fee? However, as we are getting dollars and our local currency is weak, I guess that anytime they pay the note is still valuable
I’d say 10-15% is standard, but the point is to not get to that point. Avoid charging interest, do everything you can to encourage the client to pay on time. Late fees, while sometimes needed, will probably hurt your relationship with your client. Call them before you charge them extra, talk to them, send them a reminder invoice, be proactive then when all else fails, give them a late fee.
An excellent post, and a great checklist for people who are just starting out in the freelancing world – and for those who’ve been there for some time, but don’t always remember these things. Next time, make a print-out version as well
Great article, Allan. I operate a private practice collection firm, we help tons of freelancers and small businesses, and I am always preaching contracts and paper trails. Communication and persistence are also key!
Everyone is going to have past due accounts at some point regardless how air tight their practices, but having your ducks in a row makes them way easier to collect without costly legal fees and time consuming litigation. When clients come to us with past due accounts, and signed and dated contracts allowing for interest and fees, they have a MUCH higher recovery rate!
Bad accounting practices WILL cost you money, freelancers. Utilizing a software/app such as the one offered by the author of this article will greatly reduce your losses.
Thanks Jason, whats the name of your firm?
Thanks for the tips…………
Really need to get on top of the invoices and although the most important I seem to leave it at the bottom of my list!!
Great article! Invoicing is easy to over look or to push off the list until next week. These tips are helpful to those just getting started in freelance. It took a little time to get into a system that works but once we did it made the whole process seamless and even easy!
2. Invoicing is an incredibly important part of your online business. This is the way that you and your employees are able to sustain professional and formal relationships with your clients and partners.
I started using Freshbooks about 12 months ago. Why didn’t I do it sooner? I was writing my own invoices and it was crazy. I made mistakes, wasted time and I had no place to check the status of all my payments.
I completely agree with the whole thrust of this piece and the comments: you need a system for invoicing and you need the right tools for managing it.
These are all great points.
Requiring a deposit for all projects to begin, and milestone payments for larger projects, is really important. A client most appreciates the value of your work when they’re waiting for you to complete it. Deposits and milestone payments ensure there only a small percentage of payment owed to you upon completion.
Also, using software or an app to track your work is super helpful. It will help you estimate better, know how many hours a task/product/service takes, and provides your customers a way to view and pay invoices online. I’m biased towards Scoreboard (http://getscoreboard.com) for estimating, tracking and invoicing because I created it to fit my freelancing needs. Keeping all of this information in one organized place, wherever that is, is very helpful.