Invoicing is an inescapable part of freelancing, but the process is not always obvious, especially for those who are new to the world of self-employment. How do you format an invoice? What do you put on an invoice? How do you deal with a late payment? These are all questions you might be asking yourself as you gain your first clients. In this guide to invoicing, we cover the basics, offer some tips for creating a reliable invoicing system, and share all you need to know when invoicing a client.
Track your Billable Hours and Work
We’ll keep this first tip brief, but we can’t overstate its importance when invoicing a client. Keep track of all work you do over the course of a month—whether its billable hours, word counts, expenses, etc.—so that when the time comes to draft your invoices, you won’t have to dig through emails or documents to figure out how much you are owed. How you do this is up to you: open up an Excel sheet, a Word file, or even a notebook to document your work as you go.
Establish an Invoicing System
Whether you make your own invoices or use bookkeeping software to generate invoices, the important thing is to have a consistent system that works for you when invoicing a client. Consistency not only benefits you—in terms of organization and efficiency—it also demonstrates professionalism to your clients, adds legitimacy to your work, and ultimately helps ensure you get paid on time.
The first step in establishing an invoicing system is to pick an invoice template. You can make your own custom template in Word, Google Docs, or Excel, but there are countless templates online that can be downloaded for free—this is often the easier route to take.
Alternatively, you can enlist the help of invoicing software, like Quickbooks, which will generate invoices automatically. In the end, the important thing is that your invoice template is clearly formatted,concise, and easy to replicate.
The next step in creating an efficient invoicing system is to number your invoices. Each invoice should have a unique number to identify it. You can go purely in sequential order (i.e. Invoice #001, Invoice #002, etc.), but we suggest using the invoice number to identify both the client and the invoice. For example, Invoice #2003 could indicate the 3rd invoice sent to Client 2. You can also integrate the year into your invoice number, which can help you stay organized come tax time—particularly if you are ever audited.
What to Include on Your Invoice
Now let’s look at what actually goes on an invoice. The content when invoicing a client may vary, but there are always consistent requirements. They are:
- Invoice: clearly indicate that what you are submitting is an invoice.
- Your name or business name: these should be clearly stated at the top of the invoice, and include your logo, if you have one.
- Contact information: this should include your email address, phone number, business address, etc.
- Date: this is the date you issued the invoice.
- Due date: this is the date you expect a payment by.
- Invoice number: each invoice should have a unique identification number for your bookkeeping records (read point above for more).
- Client details: this includes your client’s name and address if applicable.
- Invoice amount: the total invoice amount (including taxes and fees) should be clearly indicated at the top of the invoice.
- Detailed list of work: this is a breakdown of the work you did, your rate, and the cost per item.
- Payment details: include payment options, such as a Paypal or bank account details.
In some cases, you may also be required to include a registered business number for tax purposes and charge a sales tax on your services, such as GST/HST.
Important note, if you have a policy for late payments, include the details at the bottom of your invoice.
What to do About a Late Payment
As soon as an invoice payment has been fulfilled, make a note of it in your bookkeeping records. This will help you to track outstanding payments and follow-up with clients.
In an ideal world, every client would submit their payments on time, but as we all know, this isn’t always the case. Fortunately, when invoicing a client, a friendly reminder that the invoice is due will often do the trick.
If a reminder doesn’t cut it, try resending the overdue invoice or follow-up by phone to confirm when the payment will be made. Many freelancers encourage on-time payments by implementing a late fee policy. If you go this route, the policy must be clearly stated on all your invoices. For example: “This invoice payment is due in 30 days. Overdue payments will be subject to _% interest or _$ late fee per month.”
Looking for more financial advice? Check out our Best Budgeting Tips for Freelancers and the rest of our SkillPack blog.
