Invoices can seem like a necessary evil sometimes. They take time away from you actually doing revenue-generating work; whether that’s writing, programming, designing or something else.
However, the fact of the matter is that you have to spend time preparing, sending and organizing invoicing if you want to get paid on time.
The more efficiently you are able to do this, the better the chances of creating a payment process that’s seamless and effective.
Given that cash flows are necessary for any freelancer to thrive, invoicing is something that shouldn’t be taken lightly at all.
Here are some of the most important invoicing tips that every freelancer must know.
- Find out more about prospective clients before closing a deal
One of the most common issues with invoicing is that some clients simply tend to ignore invoices and delay payments inordinately.
It’s not always possible to figure out beforehand whether a client will become a defaulter, but it’s important to do your homework. Sometimes, in a rush to get paid work, we completely neglect doing due diligence on the client.
In today’s day and age, a quick Google search can reveal a lot about the client. You can go through their website and their social media pages.
A quick glance at the Glassdoor reviews also reveals what employees and other freelancers think of the company and if anyone has had issues getting paid before.
If a company is not well-established they may not have a complete website or strong social media presence.
In that case, go by the founders’ personal profiles. You can even see if you have any mutual connections on Linkedin who are ready to provide a reference for the prospective client. Doing this initial research will save you a lot of heartache at a later stage.
2. Advance payments
Getting an upfront deposit from a client is a great way to mitigate the risk of not getting paid. It also helps you assess whether the client is actually committed to the project and is likely to pay on time.
You can send an invoice with the total job estimate and the advance payment to be made at the outset itself, on the basis of which the client can make an advance payment.
You can charge an upfront payment of anywhere between 20% to 100% of the total amount depending upon the size of the project, the nature of the work (one-time or recurring), the client’s brand reputation and your own reputation in the field.
If the client is hesitant to make an advance payment, you can also offer a warranty on the payment if the job gets canceled before you start working on it.
3. Invest in invoicing software
If you want to stay on top of the invoicing process, it’s important to automate as much as you can. Investing in good invoicing software like FreshBooks or Zoho Invoice will help you make the entire invoicing process more streamlined and efficient.
Certain software even have a basic free plan if the number of customers and invoices being sent is limited. This is a great option for freelancers who don’t have too many clients.
With invoicing software, you get access to a number of features including automating recurring invoices, generating invoices with all the necessary details, creating professional and customized invoices, breaking down the project into milestones and invoicing accordingly, and so on.
Investing in invoicing software will help you build a sustainable process that will eventually free up your time and allow you to focus on more strategic tasks.
4. Establish fair payment terms
The right payment terms are very important in invoicing. These terms need to be established during the agreement stage itself so that there are no misunderstandings or disagreements later.
Establish terms that work for you without being completely impossible for the buyer and then include them in every invoice, serving as a reminder to the client.
Here are some important things that need to be included:
a) The service being provided
Include things like the exact nature of the services being provided by the seller. It’s important to mention the quality, type, quantity, and the brand of the product being sold. This initial clarity will help avoid misunderstandings in the long run.
b) Payment due date
This is the most important aspect of the payment terms. It’s important to make sure you don’t end up feeling short-changed in any way.
As a freelancer, your cash flows are important and don’t compromise on that in a hurry to close the deal. Whichever due date both parties arrive at, it should be incorporated in the agreement and used in every invoice.
c) Early termination
Make sure you have provisions for things like compensation, notice, and so on in the event that a contract gets terminated before the end date.
It’s important to build certain quality standards when it comes to your work and then guarantee that uniform standard in all your projects. This helps clients become comfortable even before the project begins.
e) Timeline for completion
A work schedule or calendar should form part of the payment terms. This will include the overall timeline as well as a milestone-wise breakdown if any. This schedule will also make it easier to identify when the client has to be invoiced.
5. Build payment options
The more payment options for your client, the faster you will receive the payment. For instance, if a client is more prone to making payments online, they may take much longer to send your cheque in the mail.
Luckily, it’s very easy to add a host of payment options today. If you’re already using invoicing software this becomes even easier. All you need to do is integrate your software with a payment gateway like PayPal, RazorPay, and so on.
This will automatically enable your clients to make payments through a variety of modes including online wallets, credit or debit cards, and net banking.
Once you provide your client with a variety of payment options, they will choose the one that’s easiest for them and have no excuse to delay your payments.
6. Include details of the product or service
Your invoice has to contain an itemized list of products or services that have been rendered, in as much detail as possible.
If you’re a freelance writer, for instance, it’s not enough to bill your client with a description that says “Payment for writing blog posts”. You need to include details like the date the blog post was delivered, the topic that was written, the word count, and so on.
The more details you include in the invoice, the less scope there is for clarification and re-work, which makes it easier to get paid on time.
7. Streamline the payment process
Many times you may send invoices on time but you may not send it to the right person. The person you work with is usually not the one in charge of actually releasing the payment.
That is usually in the hands of an accountant who handles the entire bookkeeping and payment process. In this case, by sending your invoices only to the person you directly work with, you run the risk of delaying the payment process.
To avoid this, it’s much better to get the email id of the accountant from the beginning and mark a copy to them when you send the invoice. Of course, this will depend on the exact policies that the client has but in most cases it’s an effective tool to cut down on your payment cycle.
8. Be aware of changes outside the scope of work
It’s very important to keep in mind the terms of the agreement and the scope of work. In many cases, clients often think of additional work while the project is underway and they either don’t realize it's out of the scope discussed or don’t think it’s in their interest to mention it.
The onus is on you to figure out when the work you’re doing is beyond the scope of the project as outlined in the agreement. Once you realize this, immediately inform the client that this work will be billed separately and also mention what the cost will be.
The client then has the option of agreeing with this or requesting you to not go ahead with the additional work. Don’t make the mistake of doing extra work and then sending a surprise invoice to the client. This will only result in conflict at a later stage.
9. Use penalties and incentives
When it comes to getting paid on time, using the carrot and stick approach is usually a smart strategy. On the one hand, you should penalize clients when they delay the payment beyond the due date.
Charge a standard rate of interest for the entire period that the invoice has been overdue. Keep sending reminder invoices to the client which have details on both the original amount due as well as the interest being charged. This will serve as a powerful tool to push clients to make the payments at the earliest.
Another useful tool is early discounting, which basically means you offer a discount if the client pays you before the invoice becomes due.
You can mention this discount on the invoice itself. For instance, you can offer a 5% discount to clients if they pay before the invoice due date. This just acts as that extra motivation for clients to prioritize your payment.
10. Use quotes and estimates
You should provide a special “Quotes and Estimates” invoice before the project even starts to give your client details like proposed price, deadlines, delivery items, revisions, and so on.
This gives your client a comprehensive idea of what’s coming. It also gives you a useful reference point when you actually send invoices across, thereby eliminating the scope for confusion and disagreements.
Plus, most invoicing software will have a provision for converting proposals or estimates into final invoices so preparing a proposal makes life much easier when it comes to actual invoicing.
11. Build a follow-up mechanism
You need to create a comprehensive follow-up mechanism that will ensure that you don’t miss out on timely payments. Don’t just assume that the client will automatically pay once you send the invoice.
It’s important to send timely reminders to the client so that making the payment is always on their mind.
If you don’t get a response to emails, then you can consider following up with a telephone call. You don’t need to do this in a tone that’s aggressive or combative.
All you need to do is be polite but firm and stay consistent in your communication with the client.
12. Decide your charges
The key to effectiveness as a freelancer is to get your pricing just right. A common impulse among many freelancers, especially when they’re just starting out, is to price their service very low in order to capture as many clients as they can.
This is a very poor strategy. In the first place, ridiculously low prices will always throw off reputable clients you actually want to work with. They will always suspect there is something amiss in the quality of your work which is why the prices are so low.
Also, for much the same reason, you will end up getting bottom of the barrel clients who are likely to give you huge quantities of largely uninspiring work. And, who may even be more likely to default on payments in the long run.
To price yourself accurately, just look at the range of pricing for the services you offer and decide which end of the market you want to cater to (premium, low-budget, or mid-segment).
As a freelancer, donning multiple hats is part of the job description. You need to be everything at the same time — accountant, creator, entrepreneur, and marketer.
It may often seem tempting to ignore administrative tasks like invoicing. However, whether you like it or not, invoicing is the key to getting paid faster as a freelancer.
If you’re not careful about your invoicing process, chances are you might mess up your cash flows to the point where the survival of your business gets called into question.
Use all the information and tools at your disposal to stay on top of the invoicing process, freeing up your time and energy to focus on more critical and creatively satisfying tasks.
We have listed 12 very important invoicing tips for freelancers in this article but there can be even more. We would love to know from you if there are any more tips you would like to share with our readers in the comments below.
And, if you are a freelancer looking out for a free invoicing solution do check out Gridle’s Free Forever Invoicing Software