When I began freelance writing, a very sage mentor told me, “Just find a client. The rest of your business will work itself out.” And she was totally right. I had been spending way too much time gathering my writing samples, collecting testimonials, and perfecting my website, but none of that was doing me any good until I actually convinced a client to pay me for writing.
When it came time to invoice, I dug up a Microsoft Word template, modified it to suit my needs and emailed that to him. Pretty soon a check for $100 bucks arrived. Yay! I was doing something right.
But after awhile – when jobs started coming in and invoicing started flying out of my inbox – I realized that I wasn’t doing the greatest job keeping track of who owed me money, how much I could expect to come in by rent time, and who was taking the money and running.
I realized that my business was growing and I couldn’t get by on just winging it anymore. Here’s what I learned.
Keep it Simple
When a client receives your invoice, a few simple things should be readily apparent: who you are, how much they owe you, when it’s due and why they owe you this much (i.e. what you did for them). Be especially diligent about the latter – if problems ever arise you should both be able to refer back to your invoice and know why it was sent. Keep these four things in mind and you should never have any trouble with angry clients.
Keep Track of Who Owes You What
When you’re young and starving this isn’t hard – you notice when the money from those first few writing gigs hasn’t hit your pocket yet because you have unpaid invoices. But as your business grows and you have more and more invoices sitting out there in accounts payable departments sprouting mold, things can get trickier. Make sure you know who has paid you, who owes you but is getting to it, and who needs a gentle reminder.
Specify Your Late Fee on Every Invoice
If I recall correctly, my very first freelance agreement specified a late fee of 1.5% for every 30 days the invoice wasn’t paid. But it wasn’t until I decided to revamp my invoicing system that I realized I’d never actually specified this late fee on my invoices. Remember, the person who actually pays you is often different from the person who signed your freelance agreement in the first place. Make sure they know there will be penalties for failing to pay so you don’t end up in the “when I get to it” pile.
Ask Clients How they Want You To Invoice
As I mentioned before, my very first invoices were ugly Microsoft Word templates. Well guess what? I still use those templates for one client to this very day. When I tried to update him to electronic invoices he resisted. The first time I sprang a new style invoice on this client, he wrote back a simple, “Let’s please go back to the old invoices.” And so we did. It may take me an extra minute or two to write up this old school invoice, but better me taking a little more time to invoice him than him taking a lot more time to pay me because I send him invoices in a way that’s unnatural to him.
Most online invoicing services take care of #’s 1-4 above. They keep track of when you sent invoices to whom. They look professional. They allow you to add in a late penalty, and they offer a one-stop-dashboard where you can login and see the state of your business’s financial health. Better yet, they save a lot of time manually filling out invoices in your old school Microsoft Word template.
I’m curious – what was your very first invoice like?
As a matter of fact I just gave someone my first invoice the other day. This is a client that I have been doing business with for a long time, but it was my first ever invoice. I want to start doing business more business-like so I decided to start using invoices. Not sure what should or shouldn’t be included, I did what you said you did – except it was an Excel template instead of Word.
I noticed later that the invoice number was 10000 where it should have been 00001.
This is exactly why I wrote this post. Have you ever heard of anybody being instructed on how to write an invoice? This is something we sort of fly into blind and then feel around until we figure it out. And if no major problems erupt, it’s quite possible that we might be sending slightly faulty invoices for years and years! That’s why I like online invoicing – most services (like WePay, the one I use) – make sure you have all the fields filled out so you can’t miss anything vital (like that pesky due date.) Thanks for commenting. May your invoice is paid on time and in full. ;)
Excellent advice Jennifer!
You nailed it with the tips about making sure you put a due date on the invoice — you’d be amazed at the people who forget this. And how many people do you know who pay bills without a due date? Not putting a due date is a good way to not get paid.
The other tip I really like is the one about keeping track of who owes you what. You can’t survive in business without money flowing in the door. And if you don’t keep track, a lot of that can be lost.
Thanks for replying, Denise! Like I was telling the other commenter, we never get a course in writing invoices. It’s one of those things that we just sort of do, and who knows if we’re doing it right? This post was inspired by talking with my friend P.S. Jones over at Diary of a Mad Freelancer (http://diaryofamadfreelancer.com/dude-money/) after she received a payment from a magazine that she wasn’t sure she actually deserved. While that’s a VERY good problem, an online invoicing dashboard would have cleared that mystery up and saved her and the client a lot of administrative legwork.
Thanks again for commenting. I know you’re a pro, so let me know if I missed anything!
Hey Jennifer, Thanks for the tip about the “WePay” online invoicing service. I checked it out and was surprised to find out that it’s free (well within my budget). I created an account – now all I have to do is find another customer – kidding. Thanks a bunch :)
Hey, if you build it, they will come, right? ;)
Seriously, glad I could help! Hope this keeps you organized and ready when you land that next client!
Two comments: I always write “Thank you!” on the invoice — I am genuinely appreciative and clients notice that.
In terms of who has paid you, an easy way to keep track is to print out a copy of your invoice. When the check arrives, I staple the check stub to the copy of the invoice and that way I have records of everything. You can also make sure the check matches the amount of your invoice.
I agree about the “thank you.” When researching this post, I read something that said that an invoice with a personal message on it – even just a thank you or a little update about your business – is more likely to get paid on time. Maybe it reminds your customer that you’re a human just like them?
As for invoicing, that’s a great way to do it with paper invoices. I like online invoicing because you can do the same thing but it’s all with a few clicks instead of with paper. When I first started writing for a living, I was a green/sustainability write and I made a commitment to try and go paperless (which, come to think of it, would be a great blog post to write…!) so I try not to keep files. I’ve had to keep a few here and there. Of course, I’m not saying there’s a thing wrong with your system. If it isn’t broke, don’t fix it!
Excellent advice for beginner business owners who are still their own accounting departments!
I particularly agree and advocate using invoicing software to keep track of accounts receivable. To add to your helpful advice, I just want to remind everyone to use the software best suited for YOUR needs. Traditional accounting software may be a bit too complex for freelancers, startups, or beginning small business owners.
Don’t just run to Quickbooks. Take the time to try out free trials of other software programs. Something you’ve never heard of may be so easy to use that you find yourself in more control of your finances than ever.
Thanks for posting :)
Very good point, Nikki! I use Outright.com for my billing – they’re a 4 year old company and they were created expressly for 1-2 person companies, freelancers and online sellers – exactly the people who are prone to keeping their books with a spreadsheet. Plus accounts are free! (Disclosure: They’re also a client of mine.) Like you said – everybody needs to use the accounting software that’s right for them. If you’re huge, maybe Quickbooks is the answer, but for so many freelancers and very small business owners, Quickbooks is like trying to fill your bathtub with a fire hose.
Some really good advice there, thanks. I’m still writing manual invoices in Word and came a bit of a cropper this month as I added up the total wrong and charged my client an extra £20 by mistake. Luckily, they took it well and we laughed it off and I’ll deduct it from the next invoice.
This made all the more embarrassing by the fact that I’m now working for a small business that produces desktop invoicing software. Eek! I’d better start using it for myself quick!
Not here to do a blatant sell but there’s a post on our blog if anyone wants to compare the mertits of desktop vs online invoicing software plus some great accounting tips for small biz.
See you again soon.
Thanks for the tip, Sorelle! I use WePay for invoicing, but as you said, sometimes it makes sense to just use SOMETHING to keep yourself organized or you’lll end up making a mistake. And some clients aren’t as nice about it as others!
It’s true as you grow your business, you’ll need to get organized. If you don’t invoice correctly, your clients may end up questioning the quality of your work.