What is an invoice and what does it do?
An invoice is, essentially, the bill you send to your freelancer client to request payment. It's essentially your 'tab' letting the client know that payment is now due, the amount due, and how to pay – whether that's by bank transfer or credit card. It's then up to your client to pay it and it's up to you to make sure that it actually gets paid.
What should be on your invoice?
The invoice is designed to provide the client with all of the necessary info they need to get you paid in a timely manner. Some pieces of information that you'll want to include on your invoice:
Your name and/or legal business name, your email address, your mailing address (if you want to accept paper checks), your phone number
The items that you are invoicing for, including a brief description of item and price of each item
The total amount due and the payment terms, such as when it is due by
What forms of payment you're able to accept.
You'll also want to include your client's name and company name as well for reference.
Now about breaking down your invoice – I get a lot of questions about how granular an invoice should be. That is, how detailed should you be for each line item. The answer is that's entirely up to you.
Some freelancers are very detailed and granular and show specific data from their time tracking software. Others have a simple, single line item that says something to the effect of "Marketing Services for Client" and the price. For project-based work (think 'a la carte'), I include the main project as a line item as well as any add-ons.
When I am sending an invoice for a retainer client, I typically keep it pretty broad. They know the work that I did during that month's retainer and the purpose of the invoice is not to remind them of it all but instead to help them understand what they're paying for.
If your services all fall under a single month's retainer fee, I tend to like to keep it simple. If you have upsells or additional charges, like maybe you bought some extra stock video or a typeface and need to bill that through to the client, I like to see those broken out as separate line items.
When should you send your invoice?
This is a tricky question!! And the answer is the dreaded "it depends." Let me explain.
I highly recommend that you send an invoice for AT LEAST 50% of the total value (or estimated value) of the project up front as a "down payment" for the project. In most situations, I require full payment upfront from new clients.
When the project concludes, I send a second invoice for the remainder of the outstanding balance. When I receive payment in full, including any and all add-ons and fees, I release the final work to the client. My own master service agreement states that I own all intellectual property until payment in full is received so this is not a surprise to the client.
You might include that clause in your own master services agreement as well as your payment timetable and any other payment terms (late fees are a blessing in ensuring timely payment!) that you need to stipulate.
It's ALWAYS better to get the payment terms out in the open and make sure the client acknowledges them by getting that signature on your master services agreement AND your statement of work before moving forward because the paper trail is king as a freelancer.
Here is the timetable that I use for sending invoices to my own freelance clients:
As soon as I have a client agree to start a project, I send that first invoice for the amount agreed-upon, whether that's the 50% upfront or 100%.
Then I send the final invoice as we are getting close to wrapping up so that the client has at least a few days to get that squared away before we conclude the project and any deliverables are packaged up and sent to the client. That package is not sent over until I receive the final payment.
In terms of retainers, I send the first month's invoice as soon as the client indicates they want to move forward with the retainer and let them know that work cannot begin until that invoice is paid and clears my bank account.
Going forward, all following month's retainer invoices are sent about a week before the close of the prior month so that they have plenty of time to get paid up before the next month (and the next month's work) begins.
One thing to keep in mind when it comes to timelines is that the larger a client's company is, the more complex it is to deal with their accounting department. Some larger corporations require that you have what is called Net 15 or Net 30 payment windows, which just means that you allow the client 15 or 30 full days to pay their invoice before it can be considered overdue.
When I'm dealing with small businesses, especially those with only a few people, my payments are due upon receipt with a late fee after the balance is unpaid beyond 7 business days.
When I work with enterprise brands (think Fortune 500) then I am willing to be a little bit more flexible on the payment terms because I know that larger companies need more time to process invoices and remit payment, and typically, my engagements and projects are much larger in value for those businesses, too. Unfortunately (and I wish it wasn't this way!!) I also know that my risk for nonpayment is much lower with established businesses who have a reputation to protect.
How can you accept payment when your clients pay your invoice?
There are two ways you can send your invoice and both options will get the job done but both come with some pros and cons. So let's take a look at each of them.
The first way to format and send your invoice is to simply use a document processor (I love and swear by Google Docs – it's a free to Microsoft Word and you can use it in the cloud!) to create an invoice. You'll then "save as" or export it as a .pdf. If you want to go this route, be sure to snag my free Google Docs template here! You can then send it straight from your business email address as an attachment. The pros for using the email attachment method is that it's super simple and straightforward. One cons of this method is that you'll need to manually track that invoice and keep an eye on when it becomes overdue. Another wrench in the plan is that you still need to find a way to accept payment. Many freelance clients expect to pay by credit card these days so the .pdf route doesn't offer a "baked in" way to offer credit card payments.
That brings me to option number two – use a web app that digitizes and automates your invoicing and credit card processing. I'm a big, big fan (and customer) of Novo Bank. I have been using them since my old business bank shut down and I absolutely love their platform.
First of all, it's free and it's jam packed with all of the features you'll need from a business bank... including invoicing. So you can send your invoice straight from your business bank, accept credit cards and set aside your tax liability all in one place. If you'd like to check it out, you can learn more about Novo and even sign up here.
Either way works, but I'm a big believer in automating what you can and making your life AND your client's life much easier so I recommend Novo.
What about credit card processing fees?
One thing you should know about accepting credit card payments from your clients is that payment processors (like Stripe, my favorite – it's who Novo uses and it's also free to sign up for a Stripe business account when you set up your Novo business banking account) all charge 3% to process that transaction.
You might be tempted to include a credit card processing fee on your invoice as a line item but I'll strongly encourage you to reconsider for two reasons.
One, it's a cost of doing business and a lot of clients will see it as stingy for you to try to nickel and dime them.
And two, in some states, charging a credit card fee is illegal... so why create a headache for yourself in keeping track of where you can charge it and where you can't? My suggestion: just skip it.
Your pricing should be high enough that 3% won't make much of a difference to you, so make sure you account for that payment processing fee when you quote the project to the client and it won't be a big deal. (If you need some help figuring out how much to charge to cover that fee, check out my free Freelancer Payment Processing Calculator here.)
Check out the FREE Google Docs invoice template below to get you started creating invoices quickly.
If you're looking for an upgraded, more automated way to handle your invoicing process, take a look at Novo for a free business checking account with built-in invoicing AND payment processing.
Free Google Docs invoice template
Sign up for free business checking at Bank Novo and send your invoices AND accept credit cards for free
Get started by signing up for a free account here. (Full disclosure: I am a Novo partner and do receive a referral commission should you choose to fund your checking account.)