While it’s always preferable to have a signed contract or other written agreement in place, you don’t have to have a contract to invoice a client. While you can still recover owed money without a contract, it’s simpler to have one created—just in case. Check out this complete guide to making invoices for more tips on creating professional invoices to send to clients. Invoicing is a crucial part of small business accounting because it helps freelancers and entrepreneurs get paid faster by their clients.
With new clients, you may wish to charge a deposit upfront to ensure they’re willing and able to pay you. It’s common to charge anywhere between 10 and 50 percent as a deposit, depending on your industry and the project scope—research what other freelancers like you are charging in your area. It is recommended that you use billing codes to categorize your products, track your money, identify services, and track business finances. You can use business codes in reporting to monitor how your business spends resources and time and ensure ongoing profitability. Old-school timekeeping methods, such as maintaining timesheets or spreadsheets, often lead to billing errors and inconsistencies due to their extensive nature.
What is the client billing process? (step-by-step)
For many independent contractors, the invoicing and collection portion of their business is the greatest struggle. On the other hand, accounting software offers more advanced features, such as bank reconciliation, financial reports, and inventory management. Accounting software typically has built-in invoicing but allows you to balance the books and better track your finances. You can generate automatic invoices with a unique invoice number, track all project details, manage any past-due payments, and view every one of your invoices on a single dashboard. Many even feature built-in tools and analytics to help you improve the billing process. When you allow different forms of payment, you make it easier for clients to use the form of payment that works best for them and their cash flow.
Keep up with Michelle’s CPA career — and ultramarathoning endeavors — on LinkedIn. The last thing you need is an external party accessing your financial records or creating fraudulent invoices. Choose a system that uses a secure network that can only be accessed by authorized users. Having an easy-to-use payment process, like clickable payment links in your invoice, can also streamline your B2B operations with suppliers and vendors. Know that legal action, in most cases, leads creating reports overview 2020 to you losing business with the client.
Should you bill a client before service?
- Unless you plan to take advantage of all of the features offered by Xero, there are plenty of more affordable (and less confusing) invoicing solutions on the market.
- Invoice2go offers customizable invoicing plus additional features like expense tracking, estimates, time tracking, and purchase order management.
- Insights into building businesses better, from hiring to profitability (and everything in between).
- If you want to integrate with your accounting software, you will need to upgrade to a more expensive plan.
- SOWs aim to specify precisely what you will be working on, as well as the deliverables, deadlines, and costs.
Time tracking software like Toggl Track is an ideal solution for individuals and teams of all sizes that bill for their time. This system records exactly how long each task or project takes and compiles the billable time data into an invoice to send to the client. Properly documented invoices serve as legal records of the services rendered and the agreed-upon payment terms. In case of disputes or discrepancies, these invoices become valuable evidence to support your claims, protecting you from potential conflicts and safeguarding your rights as an agency owner.
Connect your accounting software (optional)
The standard interest rate on unpaid invoices is between 1% and 2% per month, but you can choose the amount at your discretion. Small claims court may be suitable depending on the size of your business and the amount the client owes you. Before you send the invoice, you must ensure all the information is correct to prevent invoice queries that could delay payment.
Once your client signs the proposal, it becomes a legally binding agreement that protects both parties. If any billing dispute arises, this document can be referenced as a source of truth to resolve the issue. Crafting a proposal or statement of work (SOW) is more than just putting pen to paper; it’s about laying the foundation for successful client collaboration. SOWs aim to specify precisely what you will be working on, as well as the deliverables, deadlines, and costs.
Here are a few common mistakes you should be aware of so you can enjoy a smooth invoicing and payment process. Unfortunately, there may be times when your clients are late making payments. Software like Zoho Invoice and PayPal are good invoicing solutions for larger businesses. They provide an efficient and accurate invoicing system, the ability to track payments, and improved financial management. If you want to ensure you get paid on time, you must get invoicing right with a clear, professional invoice and billing process. As your agency business expands, an established client billing format and process becomes even more crucial.
Alternatively, you can save time by trying one of our free, professional-looking invoice templates for self-employed people. The invoicing process is very similar between self-employed people and businesses. Simply include your name (and business name if you have one), your business address (or your home address), and the usual invoice information.
