How to write a better invoice
You’ve quit your 9-to-5 nightmare to pursue your dreams. You’ve created a cozy home office, got your first clients, and are working slowly but surely toward your goals. But there’s one tiny problem.
It seems like your clients think freelance is free. While not getting paid at all is a problem you can only solve by not working with unreputable companies, there’s one sure method to get paid faster: write your invoices with psychology in mind.
Here are some things to consider next time you're ready to get paid:
1. Make sure everything’s right
This tip can hardly be called psychology-based, but it’s an important one. Before you send an invoice, check and double-check to make sure everything’s right.
If you make a mistake in the total you’re owed or the billing address, it could take lots of time to sort out the misunderstanding. The worst clients may simply ignore the invoice since it’s incorrect and wait for you to figure out the mistake on your own.
2. Set a realistic time frame
Making a living as a freelancer can be challenging. One month, you’re busy and rich, and the next month, you’re struggling to find a client while burning through your savings.
It’s no wonder many are tempted to send invoices that are due upon receipt. It’s a convenient way to cover a hole in your budget.
The ugly truth is that not all companies are able to stick to those terms. If you’re doing a freelance job for a corporation, they may have set dates for payments, and the company isn’t going to change them for you.
And small business owners may be too busy managing operations to send your payment immediately. They may put it off till they have a free moment and eventually forget about it.
Give the person you’re sending an invoice to plenty of time to make a payment —14 days or more — and provide timely reminders.
3. Break down the activities
Explaining what you’re billing the company for is essential for any invoice. If you don’t do a good job of this, the recipient may start thinking you’ve made a mistake somewhere. This can lead to them taking time to go back and check your activities and correspondence, and will do nothing but slow down the payment process.
If you did a complex project for the client, break down every step of the process. If you can attach the number of hours you’ve spent on each step and the hourly rate, that’s best. This shows the client how much work you’ve really done, and leaves no doubt about whether it’s worth it.
4. Include taxes
Is your service or product subject to a tax in your state or the state where your client is located? Make their job easier and include the taxes on the invoice. It will save your clients some time and help them make your payment sooner.
It’s not much work on your part, either. You can use the same tax software you use to file your taxes to do it. If it’s that easy, why won’t the client do it themselves? There are two main reasons: 1) Small business owners may not have the software to do it quickly, as some do their taxes manually, and 2) in big companies, the biggest slowdowns happen when a task gets passed around between departments. If one person can’t process your invoice and send the payment all at once, you’ll be left waiting.
5. Brand for recognition
Some of your clients may be fulfilling thousands of invoices a month. The fact that your invoice looks the same as everybody else’s doesn’t help. If there’s a 14-day time frame and the person responsible for making a payment didn’t work with you directly, recognizing what the company is paying for can be a struggle.
However, if you have a distinct style and a recognizable logo, employees will be able to glance at the invoice and instantly remember you and the job you did for the company. It makes paying an invoice that much faster.
6. Make payment easy
Many people are serial procrastinators. If a task is not super easy and straightforward, they’ll put it off for eternity. Make sure you handle your procrastinating clients with grace and give them an easy way to make payments.
Provide several ways for them to pay the invoice. If you’re using a service like PayPal, include the link that leads them directly to checkout, rather than to your PayPal account. The fewer steps they have to go through to give you money, the better.
7. Sticks and carrots
Most of the previous tips here address specific types of clients, or nudge clients toward making a timely payment. This one makes sure you get paid on time.
Implementing this method is pretty straightforward, but it will require you come to an agreement before you begin working with the company: Make the incentive to pay on time a part of your contract.
Give a 5% discount to those who pay upon receipt, and add a 5% penalty for those who miss a payment deadline. It may seem harsh, but would everybody drive nicely if there were no tickets? Probably not. The same is true about business deals: Either you have a way of making sure a deal is followed through on or your demands are optional.
8. Reach out
What’s the easiest way to get your invoice paid on time? Reach out to the person who’s going to pay you and tell them you’ve sent them an invoice.
The relationship you have with your client is more important than paperwork. If you know their preferred method of payment and can reach them fast, most nonpayment cases can be taken care of easily.
The bottom line is this: Give your clients an incentive to pay early, make sure it’s easy to pay you, and reach out to them to give them a heads-up. The best thing about being a freelancer is that if they keep delaying payments, you can stop working with them.
You’re your own boss, after all.