Seven Secrets to Master the Art of Invoicing

No matter their industry, freelancers, small business owners, and other indie workers all feel the overwhelming burden of billing clients and tracking hours and expenses. It’s hard to anticipate the administrative aspects in being independent, and time spent managing billing often seems to get in the way of actual work.

While invoicing and the follow-up may be irritating necessities on the road to getting paid, there are some simple things you can do to improve the way you invoice, make sure you get paid on time, and increase your cash flow. Here are seven secrets to billing success:

1. Use a contract

One key to a successful long-term billing strategy is setting the right expectations from day one. Most clients will expect to sign a contract, so don’t hesitate to use one. By walking your clients through all the key deliverables and payment terms at the beginning, you can help avoid any misunderstandings down the road. Make sure that your contract covers your late payment policies and that your client is aware of the ramifications.

2.  Choose your invoice language wisely

Believe it or not, the little words describing your payment terms at the bottom of your invoice actually affect how quickly you get paid. We conducted a study of FreshBooks users’ payment terms and found that phrasing on an invoice could lead to faster payments. Here are some things to keep in mind:

     

  • Politeness matters: A simple phrase like “Thank you for your business. Please pay within…” increases the chance an invoice will be paid by 5 percent.
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  • Use plain English: “30 days” is clearer to understand (and thus more effective) than jargon like “Net30.”
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  • Apply late payment fees: Including a message about interest charged on late payment has two results. It gets you paid slower, but also increases the percentage of invoices that will get paid.

The bottom line is if you downloaded an invoice template from the web, now is the time to review your specific language. Try a simple courteous message like “Thank You. We really appreciate your business. Please send payment within 21 days of receiving this invoice.”

3. Invoice early and often

This is a simple concept, but often needs repeating: the sooner you invoice your clients, the sooner they pay you. Each time you are due a payment (usually on a deliverable), send off an invoice – no matter how hectic work may seem at the moment. Your business depends on getting paid, so stay disciplined about sending your invoices.

In addition, when you break down big fees into more sizable chunks (for example, three payments of $1500 rather than one lump sum of $4500), it’s typically easier for clients to pay you promptly. If you are invoicing for a partial payment, make sure this is clearly stated on the invoice to avoid any confusion.

4. Itemize your invoices

Each invoice should be as clear and specific as possible. Itemizing your invoices may require more time, but it can save you from time-consuming misunderstandings over what has been billed for and what still needs to be covered. Most importantly, if a client does not understand what they are being charged for, they are less likely to sign off on the invoice in a prompt manner.

Your invoice is a great opportunity to showcase just how much value your client is getting for your services. For example, instead of putting ‘website’ in the description, use something more specific such as “10 pages of HTML design and development for product pages, including contact form and site map.”

5. Know who pays you

If you don’t know already, find out who actually signs the checks and processes the payments. If your client is a small business, it’s probably the business owner. If your client is a mid- to large-sized company, then it’s most likely someone in the accounting department or financial controller.

With any new client, ask upfront for the name, phone number, and email of the person who will be processing your invoices. This information will come in handy when/if you need to address any outstanding invoices in the future.   

6. Follow up on outstanding payments

In a perfect world, any invoice would be paid in minutes, or at least days, without any follow-up required. Yet we all know that invoices can take anywhere from three to twelve weeks to get paid – and that timeline can wreak havoc on a small business’ cash flow. For this reason, it’s important to hone your follow-up strategy.

In some cases, a quick email or friendly phone call is all that’s needed to remind your client of an outstanding payment. You can also set up an automatic reminder via your billing solution. Don’t nag your clients to exhaustion, but it’s more than reasonable to send a reminder on the due date and then once per week until payment is received.

7. When legal action is necessary

What happens when a client ignores your polite reminders? First, you should cease any ongoing work for the client, but what about seeking payment for the hard work you already invested? When a client situation gets really bad, small claims court is an option; however, bear in mind that this route is most likely not worth the effort and expense.

As an alternative to small claims court, send a formal letter after your casual prompts have gone unanswered. If that fails, consult a lawyer and have them send a letter on your behalf. A strongly worded letter from your legal consult is usually enough to secure a speedy response. Most freelancers and independent professionals will go their entire career without having to resort to such drastic measures. Hopefully, the same will hold true for you as well.

By developing a strong client relationship and heading off potential issues early, you can improve your chances of getting paid on time. Following these seven tips will help you spend less time chasing down payments so you can focus on growing your business instead.  

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