How to invoice clients the right way
Congratulations! You won a job, worked hard to produce a great site, and the client is thrilled with the results. Now, wouldn’t it be nice to get paid?
While invoicing may not seem to most enthralling subject, it is without doubt one of the most crucial areas for every business. Your invoice reflects your branding, reinforces your professionalism, is an extra point of sale to win more work, and most importantly gets you paid. Do it wrong, and you won’t be in business for long.
Many freelancers and small business owners struggle with creating invoices, especially those who do everything for their business by themselves.
In the following post, I’ll try to clarify this process as well as some terms and practices related to it, while avoiding any accounting jargon. In addition, I’ll give you 10 beautiful invoice templates you can customize and use immediately and I’ll show you some great tools that will simplify your life and help you invoice like a pro.
What is an invoice?
An invoice, or bill, is a commercial document issued by the seller, received by the buyer and which contains details such as prices and quantities of goods, payment methods, and maximum period within which the buyer should make the payment.
The seller is the vendor or service provider, while the buyer is the customer or client.
This document is important for both parties because the seller needs to keep a copy as a record of their sales, and the client needs to keep a copy as a record of their purchase.
Sending an invoice indicates that ‘someone owes you money’ and a receiving an invoice indicates that ‘you owe them money’.
What should an invoice look like?
The look and language of your invoices should be in keeping with the rest of your branding and the message you’d like to deliver. It should match your business card design, letter head, tagline, even your site colors.
Even though the invoice structure is industry dependent, there are some general elements and rules that should be followed.
To remember this more easily, you can divide the invoice into 6 different sections:
Section 1: Your details
Contains details about your company (or your full name if you’re freelance), company logo, contact details, payment info etc.
If your company holds a specific legal status, for example if in the U.S. it’s a corporation, or in the U.K. it’s limited then you should include the information specific to your jurisdiction; that usually means an official address and registration number, but rules vary so check with your local tax office.
In Europe, if you’re V.A.T. registered, you must include your V.A.T. number as well.
Section 2: Rules of the game
Here you may specify the invoice options such as issue date — date of the invoice, net terms, due date, currency and P.O. Number.
In business, the term net 30 is used to indicate payment within 30 days, or it’s fairly common to see 10/15, net 30 which is another way to say 10% discount if paid in 15 days, and net due within 30 days.
However, people who are less aware of business terminology may not know what this means, so depending on who your buyer is, it may be better to use plain English instead: “Please note that payment is due on or before 07/09/2013″.
Also, bear in mind that the date formats differ internationally — payment due 07/09/2013 may mean payment in July, or September depending on the client’s location — so to avoid any ambiguities consider a more formal expression such as July 9th, 2013.
Another term that may also cause confusion is “Upon Receipt”. Freshbooks produced an interesting study which says that many people seem to interpret this as “whenever you feel like it”.
It’s as if they receive an invoice with the words ‘payable upon receipt’ and immediately dump it into the ‘whenever’ pile. Instead, using specific terms such as ’21 days’ seems to focus the client’s mind around a specific timeframe and will actually get you paid faster than asking for immediate payment. — Zach Mathew
Section 3: Your client
This part contains the name and address of the customer you are invoicing. If you’re addressing a multi-office company you need to specify the right person or department. This may not be the person you’ve been communicating during the project, so in order to get paid faster, make sure to ask who will be dealing with paying you.
Section 4: Title and number of the document
Usually, the word Invoice indicates title, but depending of the type, it can also be Bill, Tax Invoice, Pro-Forma, Quick Invoice etc. If in doubt, stick with Invoice.
The number of the invoice is a unique reference ID and is used in case of correspondence. The rule is to never use the same number for multiple documents.
In some jurisdictions it is mandatory that your invoice numbers ascend chronologically. But, they don’t have to be consecutive. If you don’t want your client knowing how much work is crossing your desk consider increasing the invoice number by a random number every time you write a new invoice: your first invoice would be ‘00007’, the next would be ‘00012’, then ‘00014’ and so on.
You can also work codes into your invoice number to jog your memory come tax time. For example 2013-06-WDD-002 can be translated as “Second Invoice for Webdesigner Depot in June 2013″. This depends on you; be creative and find a numbering scheme that suits you best.
Section 5: List of products and/or services
The itemized list should clearly describe what you are charging for — name / description of the product or service, quantity, unit price, discount (usually given as a percentage), tax and total amount charged.
The description should match the terms you have agreed with your client, so be as specific as possible. Always double-check for typos, grammatical or computational errors as they create a poor impression and can damage your reputation. In fact, triple-check your invoice before you send it out.
Another thing you should consider is the quantity and unit price entries and check what the rules are. For example, for UK businesses, if your company is VAT registered HMRC rules about VAT invoices say that you must include the price per unit on your invoice.
If you charge by the hour you might specify the amount of hours you have spent as well as your hourly rate.
Subtotals and totals with a breakdown of taxes should be calculated below the table.
Make sure everything is clear as day, because if the client cannot identify the total they are being asked to pay, it is very likely your invoice to end-up in the ‘deal with later’ pile.
Section 6: Mumbo jumbo
This is a box for your custom message or note that describes your invoice terms more thoroughly. For example if you accept more than one payment method, here you may specify which one you prefer. Is it a check, bank transfer or PayPal?
Furthermore it is a perfect spot to show appreciation. Remember, being polite matters and can really get you paid faster. Some studies claim that a simple “thanks” can increase the percentage of invoices that are paid quickly by more than 5%. Analogously, that could be translated to lots of cash per year.
Although a late fee is not my preferred way to ask for on-time payment, keep in mind that here you can specify this too. For example: “Interest accrued at 5% per month thereafter”.
Your invoice is a hidden marketing tool. Just imagine how great it would be if you could make your document stand out among 100s of others. I personally get more interested in working with clients who send me creative invoices. A well designed invoice can make paying you a pleasure.
To get you started we’ve set up 10 templates for you to download free, remember insert your own branding and personalize the wording for an effective invoice.
How do you invoice clients? What tips would you share for getting paid on time? Let us know in the comments.
Invoices kindly designed by Dimitar Stojanov.
Featured image/thumbnail, invoice image via Shutterstock.