Invoicing isn’t probably anyone’s favorite part of doing business, but sending and receiving invoices is a critical part of most small businesses’ workflows. In many cases, invoicing is necessary for you to get paid, making it a skill you’ll want to cultivate.
What Is an Invoice?
Most simply, an invoice is a document listing goods provided or services rendered to a client or customer, along with a statement of the sum due—in essence, an invoice is a bill.
An invoice breaks down how many goods or specific services were provided, assigns a price to each item, and then adds up all the prices into the total amount that the invoice recipient owes.
As the realm of freelancing and the gig economy balloons, invoicing has become an essential skill for millions of people to learn. However, many small businesses in a wide range of fields also use invoices, so understanding how they work is fundamental business-owner knowledge.
When Do You Need to Invoice?
In most cases, your invoicing experience will break down into 2 categories: you’ll either have a set invoicing process with your clients, or you’ll send out personalized invoices after you complete your work or send your goods on a case-by-case basis.
If you’re delivering work to a client as an independent contractor—that is, you’re not working for an employer on a salaried basis—you’ll probably need to submit an invoice to get paid.
Your clients might already have specific preferences for invoicing, like having regular deadlines for invoice submission and/or a template they want you to use.
On the other hand, if you provide one-off services for a large, changing customer base, you’ll probably have complete control over your invoicing deadlines and your invoices’ format. However, you’ll probably want to come up with your own rules to keep your bookkeeping manageable.
Components to an Invoice
While every business has its own approach to invoicing, payees will expect to see several elements when you submit an invoice for payment.
To start, each invoice should be dated, and you should assign an invoice number to each invoice for every discrete client or customer. Start with #1 for your first invoice to that client and go from there.
Your address and the payee’s address should be listed—even if you get direct deposit.
You should also include a line for each product or service conducted, along with its detailed description. On this line, also include the quantity of each product or service rendered—if you’re providing services, you’ll probably want to give each task its own line. Finally, assign the price of each unique product and service, along with a line total that multiplies the quantity of each product by its price. Adding dates for when the goods or services were provided is also helpful.
Finally, add up your line totals to get a final total and put that at the bottom—perhaps in a big, bold font. This total amount is what you expect to be paid.
You may want to include some details about when you expect to be paid, often within 30 or 21 days, as well as your preferred payment format (check, ACH transfer, or other option). To get the attention of any potential late payers, you should also include details about late payment fees, even if they’re mostly an empty threat.
Don’t Be Late
Even though invoicing isn’t glamorous, it is essential to getting paid. Ensure that you’re sending thorough, accurate invoices ASAP after a transaction occurs or by predetermined deadlines. If you submit an invoice in an untimely manner, that invoice might get shunted to another budgetary period, and you may have to wait weeks—or even months—to get cash in your hands.
Keep Detailed Records
Once you submit an invoice, keep records of its total value and the date that you sent it. Knowing how much money you’re owed and when it’s due will help you to assess your cash flow situation. Especially if you’re sending invoices to many different clients, you’ll need to focus on maintaining accurate records so you don’t forget about any money you’re owed.
Don’t Be Afraid to Remind
Never be afraid to send an email reminding a client that an invoice is unpaid if they’re delinquent in paying it. You don’t have to be mean—but you deserve to get paid, and it’s totally reasonable for you to speak up about that.
Automating Your Invoicing
Technology now makes invoicing easier than ever with templates, and you can even create invoices on your smartphone using the Sunrise app on the go.
When you create invoices using bookkeeping software, you can better track revenue and cash flow. Invoicing software can also help you to understand who has paid you on time—and who needs a reminder. It can also easily show you which clients consistently pay you late.