Chapter 6

Invoicing for Freelancers

What Problems Do Freelancers Face in Day-To-Day Business Activity?

As a freelancer, you are your business. However, your success is not determined by your skills and abilities alone, it’s also the way you manage your business operations that matters. Countless examples abound of freelancers providing excellent services to their clients, only to report late payments, or no payments at all. This is a typical problem which can be traced back to poor invoicing protocol, ineffective account management, and a case of not being taken seriously by the client.

Freelancers typically provide Internet-based services to their clients. These include search engine optimization (SEO), search engine marketing (SEM), writing, data entry, content management, transcription etc. Businesses benefit from employing freelancers since they are not considered full-time employees and do not receive full-time employee benefits. Freelancers are an invaluable asset to all operations – they can be called upon when needed, and their services are typically far more professional, and efficient than in-house employees.

However, freelancers need to run a tight ship. The relative anonymity of internet-based employment tends to make it easier for clients to avoid, or simply block email and invoice requests for payments from freelancers around the world. For self-employed people, there may be many reasons why you opted for freelancer status. Perhaps your company was restructuring, downsizing, or you simply felt a need to go it alone. Whatever your motivations, any work that you compete for clients must be rewarded accordingly.

Effective Ways to Guard against Payment Concerns

The most common complaints among freelancers relate to nonpayment, partial payment, or late payment from clients. As a professional person providing expert services, this is simply unacceptable on all levels. Various studies over the years have confirmed that many freelancers are routinely paid late, or not paid at all. Freelancers are required to create the necessary framework with pricing, invoicing, and payments processing before any work is undertaken for clients.

Such challenges need to be addressed with urgency and newfound resolve. A good place to start is setting up an effective invoicing system. A recent study from New York State found that lost ‘freelancer’ wages over a 1-year timeframe amounted to $3 billion in NY alone. Similar trends are evident around the world. Freelancers may believe that clients are avoiding their calls for payment, however, this is usually not the case. Once an invoice is received by a client at a company, it must be approved by the relevant manager and then sent on to the accounts department for processing. Depending on the date of the invoice, the terms of service, and the payment process at the company, the invoice will be processed accordingly. It is not at all uncommon for invoices to have a 30-day, 60-day, or 90-day payment timeframe.

Regardless, as a freelancer, you probably cannot afford to carry your clients for up to 3 months as you have daily, weekly, and monthly bills to pay like everybody else. In the United States today, there are an estimated 42 million+ freelancers, and that number is growing at a rate of knots. The Internet of Things has facilitated a culture of remote employees, and the benefits are enjoyed by businesses and freelancers alike.

What Options Do Freelancers Have to Improve the Efficiency of Their Business Operations?

The first order of business is to create an action plan for success. As a freelancer, you are your business. The buck stops with you. As such, you must take all necessary steps to ensure the professionalism of your business operations on every level. Payments processing is sacrosanct. Even before an invoice-based system has been established, it’s important to clearly indicate the payments terms and conditions in your contractual agreement you’re your clients.

Mitigating Nonpayment by Requiring Earnest Money Deposit

You may wish to opt for a customizable contract from a prepaid service or enlist the support of a legal team to create the necessary paperwork for you to email to clients. Sometimes it’s necessary to negotiate a little to ensure that you don’t lose business opportunities with clients. If a client has a 60-day payment period and your payment terms require 30-day processing, you may be able to negotiate partial payments at the 30-day mark.

There are various options available to freelancers to protect against nonpayment or late payment. One of these is an upfront fee for all work that is contracted. The money is effectively left in an escrow-style account until the work is submitted. This earnest money is payable upon acceptance of the contract terms.

You can also negotiate timeframes for incremental payments to be made via the invoicing system that you have selected. For example, instead of waiting 90 days for payment, you could have partial payments made every two weeks as incremental work is provided.

On the topic of invoicing, many options need to be considered to ensure that outstanding bills are not simply swept under the rug.

Clients must be appraised of the invoicing system you are using, and the terms of service you expect to be met. Get everything in writing, have it signed or e-signed with dates, titles, and terms of service. Armed with that information, you have recourse in the event of nonpayment. Many folks in the freelancing world report that their clients are happy with their work, but the issue is largely non-payment or late payment.

Cloud-Based Invoicing Services

Cloud-based invoicing services are coming into their own. These systems can help to depersonalize the payment system by removing emotionally-based pleas for payment from the freelancer to the client. Friendly reminders from invoice systems to clients are both professional and non-emotional. These cloud-based invoicing systems are designed to remind clients to make payment, and since they are sent from a billing-style service, they are treated as such.

Online billing and online invoicing services abound, but it’s imperative to choose the most professional services to generate the desired outcomes. With all systems, follow-up is essential. Invoices that are sent out need to be effectively managed to ensure that prompt payment is made on all of them. Since freelancers work pretty much around the clock, it’s often difficult to keep track of unpaid invoices if these are not part of an expertly managed invoicing system.

Effective Ways to Craft a Professional Invoice

Expertly crafted invoices must contain certain elements. For example, for your invoice to read well, the header must be professionally written and presented. Your business name should be displayed prominently in a legible format, and appear slightly larger than the font used in the remainder of the text. You may wish to consider using a bold option for your business name in your invoice. For example:

ABC FREELANCING CORP

1234 Town Center Drive

New York, NY

10058

Tel: 212 555 1234

Always include your relevant contact information to make it easy for the client to reach you and input your details into the accounts payments system. Many businesses prefer to use a professionally crafted logo, emblem, or insignia to accompany their invoice – this lends further credibility and builds brand awareness. Equally important on all invoices is information about the client. For example, freelancer invoices must clearly state the name of the client, the address of the client, and the contact details of the client below the header of the invoice. Your information should be posted on the left of the invoice, and the client’s on the right, or vice versa.

Other important information to include on all professional business invoices are the following:

  • The invoice preparation date, typically the end of the month, or the beginning of the month.
  • The invoice number for easy tracking and management of paid/unpaid invoices. Invoice numbers could be the first three letters of the client’s name followed by the date, or any other alphanumerical system that works for you.
  • If freelancers operate as businesses, the business registration number or company ID number must be included in the invoice to add credibility and comply with regulatory standards.
  • The payment due date is when the freelancer expects the payment to be received. This must be clearly specified on all invoices.

Invoices must also specify what payment methods are acceptable to the freelancer. Typical options include bank wire, PayPal, Skrill, Neteller, Visa, Apple Pay, etc. Remember, your choice of payment option also determines the fees and commissions you’re going to be paying to these payments processors. Invoices should also clearly state the penalties for late payment (usually outlined in the contract or working agreement). Another important issue pertains to when invoices are sent out. If clients need their invoice to be in before the end of the month, it’s important not to send invoices late. They may be placed on a pile of ‘to-pay’ invoices for the next billing cycle.

“71% of freelancers have reported difficulties getting paid at some point in their professional career.”*

The content of the invoice is equally important. The client needs to know precisely what they are being billed for, and this should be broken down into individual work components, or project-based elements. Some clients are billed by the word, the hour, or by job/project. Specify the breakdown of individual work components and the corresponding request for payment.A client should be able to quickly scanthese bullet points on the invoice so they can easily understand what they’re being charged for.

Timely payments are vital to the success of a freelancer’s business. . Since a chain is only as strong as its weakest link, the quality of the freelancer work and the bac end of business operations must be ironclad to ensure prompt and timely payments. Another big benefit of well-crafted invoicing systems is that they serve as an effective source of records in the event of tax audits.

Instead of maintaining mounds of paperwork, a properly maintained invoicing system can organize everything much more efficiently. This reduces clutter and makes it much easier to find relevant information. It may be a good idea to provide discounts on specific components of the work order, or the overall work order as an enticement to the client. Modern-day invoices can also include payment links on the actual invoice for things like PayPal, Visa, MasterCard etc. You may wish to include these in your invoices in order to make it easy for your clients to pay.

The objective of a professionally crafted invoice is to make it as easy as possible for the client to review charges and pay. Invoices sent through a professional invoicing system also create more emotional distance between the freelancer and service provider. When a freelancer urges and nudges the client to continually make payment, it comes across as unprofessional, and does not create the necessary separation between the professional work that is provided, and the management function of billing and payments. Remember, the quality of your work is just as important as your ability to collect payment for your professional services. Invoices are your point of call for this specific purpose.

FIBs Software Can Help You Achieve Your Objectives

Free Invoice Builder (FIB) makes it easy to create a professional invoice at the click of a few buttons. This online invoice generator expertly crafts PDF invoices for clients, and full logo uploads, from/to details, and full invoice information is provided. These online invoices can be tailored to individual clients, and as many work-related items as needed can be added in. A neat and tidy design characterizes the invoice generator software, and clients will find it appealing, innately simple, and effective at generating unlimited numbers of invoices.

Among the many benefits of using an invoice builder service are professional business operations by way of ready-made templates. All that’s needed is to input your personal details as a freelancer, and the client’s details to get started. Freelancers get to enjoy a professional service without the astronomical costs. It is ideal for local and international payments, and a treasure trove of help tools are available to get you through the process. Freelancers can access the blog with relevant information about the importance of accurate and professional invoicing services at any time. Free Invoice Builder is a value-added service for any freelancer, as it keeps the cost of your business operations low, while giving you all the credibility of a professionally run outfit.

*Source: Freelancers Union