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Issue № 186

Better Invoices for Better Business

by Published in Business · 36 Comments

Invoices are a critical component of every business. They serve as a bill of services, closure for projects, a legal paper trail, and an opportunity to strengthen the rapport between you and your customer.

Invoices that obfuscate information, incorrectly state terms or arrive incomplete can be a massive headache for all parties. These mistakes will only delay the payment process, so it is critical you produce invoices that clearly deliver information your client (or their accounts payable department) will need. Strategic timing and attractive presentation are also important, as they can help “soften the blow” by making your invoice seem less like a stale demand for money and more like a friendly letter.

Invoice Contents

Invoices have many small bits of important information. They should always contain the following:

  1. The word “invoice.” Obvious enough, but don’t let the client mistake it for anything other than a bill that needs to be paid. Make it big and bold and put it at the top of the page.
  2. Your Employer Identification Number (EIN) or Tax ID Number. This will be important come tax time, when the client starts putting together W-2s.
  3. Similar to the EIN, some clients may assign outside contractors a unique Vendor ID. This practice is usually found in larger companies. If you have been given one, be sure it appears conspicuously.
  4. Names and addresses of both client and contractor. Make a clear distinction between the “to” party and the “from” party.
  5. Date everything. Date the invoice (the day it goes out, not the day you write it) and list the dates of when items on the invoice were completed. In the terms, list the due date and penalty dates. If something ever goes to small claims court, the judge will look favorably on your scrupulous attention to detail.
  6. A clear, itemized list of services rendered. Descriptions should be short and to the point, and all delivery dates indicated. Next to each item, list the hourly rate, hours worked and subtotal amount.
  7. The total amount owed. On the bottom, labeled explicitly, bolded if needed.
  8. The terms of the invoice. At the very least, this should include when the invoice is due; for instance, if you expect payment within thirty days (fairly standard), simply put “30 Days.” (You could also put “15 Days” or even “Immediate” if you don’t particularly like the client.)

Setting Your Terms

The terms section of an invoice can be as simple or complex as you would like, dependent on your billing standards. You might offer a 1-2% discount for invoices paid within 15 days; similarly, you might penalize late payments. The amount is up to you. If you do set terms beyond 30 days, spell out exactly what the penalty will be for each level of delinquency. For instance, say you bill a client for $1,000. The bottom of your invoice may look like this:

               
Payment Time:15 Days30 Days60 Days
Adjustment:- 5%0+ 5%
Adjusted Total:$950$1000$1050

Delivery

You can send an invoice through e-mail or the post office, and each method has advantages and disadvantages.

Mailed invoices are more professional and are generally recommended over e-mail. The client appreciates a physical bill that can be filed, photocopied and passed along, and has less chance of getting lost. (If you send them a PDF, chances are they are going to print it out and do all these things anyway.) Taking the time to prepare, print and mail the invoice will only reinforce your professional image — especially valuable for new clients.

E-mailed invoices (PDF format is the best) often work better for regular monthly billings, like ongoing creative (similar to an advertising agency) or maintenance fees (like regular web site updates).

Personalize the invoice with a small note. A quick “thank you” is often appropriate and appreciated, and makes your business seem less like a faceless corporate billing machine.

Timing

There is a certain strategy in the timing of an invoice delivery. For down payments, the first invoice should be in the client’s hands immediately after the contract is signed. For milestone points and the final deliverable, invoices should be sent within 48 hours, while your fantastic work is still fresh in their mind. Never send an invoice prematurely, unless it is explicitly agreed upon between you and your client. No one wants to pay for unfinished work.

Instead of attaching invoices to the actual deliverables, exercise courtesy by creating a wholly separate communiqué. Your invoice will be more impressionable (and therefore remembered and acted upon) sent alone rather than buried in other documents and files.

Avoid having your invoice arrive on a Friday. No one wants to see that before heading to the beach, and it will be long forgotten by Monday. If you’re e-mailing the invoice, do it in the morning when the person is more likely to be working, and when they will be more inspired to act on it.

Aesthetics

Most freelancers and small companies use accounting software, which may or may not give you control over the design. If yours does, or if you draft your own invoices from scratch, try to escape the stale corporate output of QuickBooks and family by adjusting colors and fonts to reflect your personal brand. At the very least, get your logo on there.

Above all, ensure the information is clear and readable. Your client may appreciate your refined design sensibilities, but the accounts payable department just wants to find the big number at the bottom.

Conclusion

Armed with these tips, you’re set to bill the world in style. Be sure to keep hard copy and PDF backups of every invoice that goes out, even for the two-page web site for your sister-in-law’s hair salon. Invoices are one of the most critical links in the paper-trail chain, so take the time to ensure the information is triple-check perfect. (And if that information arrives in style, even better.)

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