October 12, 2018
As a freelancer, consultant or small business owner your success depends on getting paid by clients. If you have pitched, landed the job and delivered your work, it is now time to get payed by invoicing your client. But how do you invoice a client?
Invoicing a client is actually pretty straight forward. Once you know what your invoice should include, you can invoice a client in 4 simple steps. Start by talking to the right person in your client’s company, send out the invoice, receive your payment or follow up.
If you want to know exactly what your invoice should include and the process of invoicing your client to get payed on time and keep your business running, continue reading.
But before diving into what your invoice should include, for good measure, we just need to know what an invoice actually is.
What is a client invoice?
An invoice is a document issued by a seller to a buyer that states the amount and cost of products and services that have been provided by the seller.
An invoice identifies both the seller and buyer. It lists, describes and quantifies goods or services with a statement of the sum due for these, which much be paid by the buyer – also referenced to as a bill.
Invoices provide a detailed account of the products or services and a set of other information that can vary a bit depending on the country, the product or service sold and the type of invoice.
Different types of invoices include consular invoices, customs invoices, pro forma invoices and commercial invoices. As a freelancer or consultant, especially normal invoices and sometimes pro forma invoices should be used.
Pro forma invoices can be used, when you want to send an estimated invoice to a buyer in advance of the delivery of your services. However, this type of invoice is only used as a preliminary invoice with a quotation and is not a request for payment.
Normal invoices on the other hand serves as a demand for payment and becomes a document of title when paid in full. You should always use a normal invoice when you want to demand payment for your services, after these have been delivered.
The same information should be included in both a normal invoice and on a pro forma invoice. Let us take a look at exactly what you should include in a client invoice.
What should a client invoice include?
When you are creating your invoice, include all relevant information. Use the following checklist to be sure your invoice has all the correct information:
- The word “invoice”.
- A unique invoice number.
- Client name and contact information.
- Your name and contact information.
- Details of products or services provided.
- A breakdown of costs.
- The total amount due.
- Any discounts.
- Company number (if registered).
- VAT number (if registered).
- Tax ID.
- The date the invoice was sent.
- Due date for payment.
- Your bank details.
- Accepted methods of payment (i.e. credit cards, checks, cryptocurrencies, etc.)
- Terms and conditions (i.e. “payment must be made within 30 days”)
Invoices can be set up in many different ways. For inspiration, check out these 2 professional templates that you can freely use.
These are just 2 templates among many. Often, you can find invoices that are tailored specifically to your type of industry. You can find these invoices on invoice platforms like Invoice Simple or Office Invoices.
When you have created your invoice, it is time to start the process of invoicing your client.
How to invoice clients – the process of invoicing?
The process of invoicing is actually very straight forward. It only takes 4 steps.
Talk to the right person
Your primary point of contact in your client’s company most likely will not be a finance person. Instead, they will simply forward you invoice to their accounts department – depending on how big the company is.
This means it is often easier for everyone if you just deal with the accounts department directly.
When setting up a client project, ask for the contact details of whoever is responsible for actually paying your invoices. This way, you know the right person have actually received the invoice, once you send it.
Send the invoice
Now that you know the right contact person in your client’s company, send the invoice directly to that person.
You can choose to send the invoice in paper form or digitally via email. Establish which method should be used right from the beginning of communicating with the contact person.
We recommend sending it digitally, because your invoices will be easier to keep track of, control and file. This is especially true if you are using online accounting tools – which we will return to later on.
Time to get your pay. This is the part where you reap the benefits of your work.
But here you should be aware of individual preferences.
Some of your clients may be more comfortable paying with cash, while others might want to pay with checks or credit card. All is okay, as long as you chose a method that is acceptable to you and your clients.
In this stage of the invoice process, you can use payment options like PayPal or Stripe to accept payments. Many clients will be comfortable paying through these authoritative platforms because they are convenient, fast and secure.
Keep in mind that clients may choose one option one month and another option next month. Although this is not common, make sure to communicate with them about this, so you know where to look for their payment.
If clients don’t respond to your invoices in time, enquire from the clients whether or not they have sent their payments as the due date approaches.
Reduce the awkwardness of follow-ups and make following up easy for yourself by sending automated reminders.
Cloud-based invoicing software allows you to send automated and friendly reminders whenever an invoice is approaching its due date and you haven’t received your payment.
Even better, if you are working on an ongoing project, you can set up recurring payments so neither of you forget about the invoice.
Now that you have the whole invoicing process in place, we have a few extra tips to make invoicing even more easy and trouble-free for you.
Client invoicing tips
Now we know what should be in an invoice and what the process of invoicing is. This is good, but you can do something extra to make invoicing even better for you and your clients.
Follow these 11 tips to help you get faster payments and avoid pissing off clients.
Keep invoices simple
Often bookkeeping and especially invoicing is thought of as very serious area of business. Therefore, you might be tempted to treat this very seriously as well.
Of course, invoicing should be dealt with in a serious manner, but this can often lead to business owners making it more complex than what is necessary.
While you want to appear as professional as possible, there is no need to make invoicing more complicated than it already is. Keep it human.
Instead of using jargon like “net 30” or “due upon receipt”, use simple understandable language like “30 days” and “due within 30 days”. This is more human, simple and can’t be misunderstood. It eliminates any confusion and it doesn’t make your client feel like you are trying to be fancy or hide something from them.
Offer flexible payment terms
You can keep your clients happy and increase the speed of payments by providing them with the ability to pay your invoice with their referred payment method.
If you want to offer flexible payments terms, you could set up your business to accept different credit cards, electronic funds transfers or even cryptocurrencies like bitcoin.
Most invoicing platforms have a wide range of payment options when paying an invoice. Such platforms are very beneficial to incorporate into your business setup.
This is a very simple, but truly effective way to motivate your clients to pay the invoice on-time or even before the due date.
One way to offer incentives is to give a discount by paying before a given amount of days. If your payment terms are to pay within 30 days, you could offer them a 2% discount of the total amount of the invoice, if they pay within 10 days.
A small discount could make your client feel special and it who doesn’t want to get a discount? This is most likely the easiest way to motivate them to pay, while still making them feel very happy.
Other ways of incentivizing your clients can be through: discounts of future work, store credit, or offering gift certificate to partner’s products or services.
Be very clear
Establish common ground by explaining to the client in advance. Be as detailed as possible, without confusing them.
For example, if they are not 100% sure about the due date or preferred payment method, you can’t expect the client to receive the invoice when they receive it.
Follow this one rule: any person at your client’s company should be able to read your invoice and know exactly what they are paying for, when to pay and how to pay. After all, there is a lot of room for misunderstanding if these three things aren’t clear.
If you are very clear from the beginning, it prevents any misunderstandings and keeps the payment process running smoothly.
Clients probably have other bills to pay as well. Most likely they will pay those bills in the order they are received.
For this reason, send out your invoices as soon as your work is finished. Actually, sooner if possible.
Not only will this have them pay sooner – and who doesn’t want money faster? Invoicing promptly will also show that you are professional. The client will feel like everything is in perfect order and will be more comfortable doing business with you – given that you deliver the work as promised of course.
If it is a big job, consider asking for part payment up front (20-50% of the total amount). You can also stagger invoices at set milestones and send out invoices demanding your pay when each milestone have been met.
Show your appreciation
Perhaps just as important is invoicing promptly is showing your appreciation right away.
After you have received the payment, remember to say thank you. This will let your client know that you have received the payment and that you appreciate them, which can establish goodwill for your business.
If saying thank you is still a manual process, you can set up invoicing tools to send out “thank you” message to your clients. Then you don’t have to worry about spending time doing it manually.
Don’t surprise your clients
Don’t surprise your client with any change in your project.
If you realize that a project is going to require more time or money, let them know about this as soon as possible!
Any change in the project will usually increase the total cost of that project. Notice your client about this straight away and be available to discuss this change, so your client is not blindsided and becoming surprised when they open the invoice.
You can use automated time reporting for your clients, to keep them in the loop with what how the project is progressing. This will make your client communication a lot more efficient and the transparency will prevent any unapproved project changes.
Every client will appreciate this transparency.
If a client is beyond the due date, it is important to avoid making assumptions.
Sure, some clients might habitually pay late. But some clients might just have overseen the payment deadline.
The first time a client is beyond the invoice due date, you may fear that you will never get your payment. Stay calm. If you use firm language, you will likely regret it when they reply that the missed payment was only because of a simple oversight.
In almost every case, you will receive your payment and being polite will help your business.
Set a specific number of days until becoming firm in your language becomes necessary. The first late notice should be a friendly reminder with information on how to pay the invoice. The second late notice should be a reminder of the late fees that are due. In the third reminder, you can start to get firmer.
You want to keep a good relationship with a client to get continuous business with them. Keep a good tone of voice, be polite until being firm becomes absolutely necessary and your client will most likely appreciate doing business with you.
No one wants to think negatively about money and payments. But even though offering incentives can motivate them to pay on-time, it often estimated that 20% of invoices are being paid late.
That is why you should expect there to be a little pushback with payments and settle on terms of what will happen in the case of a client paying late.
Terms of paying late could be to include a fee that reflects your contract. You could charge an extra amount when the due date is passed, or add 1% to the total amount for each day the due date is surpassed.
You will want to work through all the possibilities before you start invoicing. Collections shouldn’t be something you make up on the go.
Remember that you should expect to chase payments from some clients, so keep calm in these situations and be the professional.
Create a filing system
When creating invoices, it is very important to keep them on file for tax purposes and for future reference. Backups is the savior of all invoicing troubles.
If you lose records of invoices, there will be not way to track which clients have been billed and which have not. Make it a habit of always filing invoices, so you have a backup of them.
Keep your invoices neatly organized in file cabinets, if you prefer to have them in physical form. However, we can recommend filing them using online cloud storage solutions like DropBox or Google Drive. It will make both filing the invoices and finding them a lot easier for you.
In the cloud storage solutions, save your invoices via invoice number or by date, so you can quickly find them and refer back to them. You could for example save them as “INV-0001-ClientName” or 16-09-13_ClientName”.
Use online accounting tools
To make invoicing even easier and save yourself inneccessary pain and stress further down the line, use online accounting tools like Quickbooks, CloudBooksApp or ClearBooks. These platforms take the hassle out of your finances and give you a more professional look.
Using online accounting tools will also help you fill and file tax returns, and automatically imports transactions to your accounts every day. It will also keep tabs on your income, expenses and profitability – giving you get a very valuable view of your business cashflow.
You have just become an invoicing expert
You now know what an invoice is, how it should be used, what it should include and how the process of invoicing looks like.
Including all the relevant information and following the 4 easy invoicing steps in the process can help you get payments faster and secure your business cash flow.
If you also remember to incorporate the invoicing tips, you will minimize any problems that could arise with your clients during the invoicing process.
Altogether, this is how to invoice a client in the best way possible.