Invoicing for Freelancers: What You Need to Know
Make it easy for clients to pay you.
If you're running your own business, one of the things you need from Day 1 is a way to collect payments. You need to send invoices and be able to collect payment. If you've never done this before, it can feel intimidating: how does the customer's money get from their bank account to your bank account?
Additionally, your invoice is a reflection of your business. If you simply send a request for payment via an email, instead of an invoice, an unscrupulous client might be tempted to ghost you. An invoice creates a paper trail of your request for payment and details the amount owed.
Here are a few things to keep in mind regarding invoicing software and preparing invoices for your clients.
1. Clearly outline payment terms in a contract
Always, always have a signed contract that outlines how and when you'll be paid. If you ever run into issues — and it happens to every freelancer — it's much easier to enforce and collect on a signed agreement.
In the contract, you'll outline payment terms, such) as:
When you'll send invoices. You might require an upfront deposit (like 50%) or payments as different milestones are completed. Or, the entire amount will be invoiced when the project is completed.
When the payment is due. You'll put a due date on the invoice such as Net 15 (due 15 days after the date of the invoice) or Net 30 (due 30 days after the date of the invoice). You may also make invoices due upon receipt, which means payment is due immediately. However, it might be tricky for many clients to make same-day payments simply due to internal processing time, especially if your clients is a company, not an individual. Net 15 gives them a few days to review the invoice and approve it.
A clear definition of milestones. If you're invoicing for different milestones, make you you outline what those milestones are and how their completion is determined. For example, my invoices are sent after the delivery of a first draft of my work, not the final version. I can't control how long it takes clients to review or approve my work, and I don't want payment to hinge on an internal review process.
If your clients want to approve the work before you invoice, you can compromise by offering a two-week review period. If clients don't review/approve within two weeks, then you invoice. That lets your clients feel like they have a chance to review and ask for any changes, but doesn't give them an unlimited amount of time.
I once worked with a company that went through some internal changes and never ended up reviewing my final deliverables. But because I had the clause in the contract that I would invoice two weeks after delivery, I was still paid for the work.
2. Use Professional Invoicing Software
My first invoices were created using a Google Sheet template that I downloaded as a PDF and emailed to clients. My first clients also paid me with a paper check, sent via snail mail, so it wasn't an issue. But I quickly realized that I needed a more robust invoicing system so I could accept credit card payments and bank transfers.
Payment processors like Quickbooks Online, Wave, Stripe, or Wise offer professional invoicing features and accept various payment methods.
- Stripe allows you to create invoices and can accept a large array of payment types (like credit cards, bank transfers, and PayPal)
- Wise is great if you need to facilitate payments with international clients
- Wave is an invoicing tool and an accounting tool rolled into one. If you use only the invoicing, it's free and can collect payments via credit card or bank transfer
- Quickbooks is a more robust accounting and invoicing tool
If you only need invoicing, you can use Stripe, Wise, or Wave's free version. If you need accounting, you'll want to use something Wave or Quickbooks. Accounting isn't mission-critical, but it's pretty important since you'll need income and expense tracking for your tax filing. It's far easier to keep track in software than in a spreadsheet.
All payment processors will collect a fee for processing payments, deducted from what the client pays you. Stripe, for example, has fees of 2.9% + 30 cents per transaction. However, the fees are worth paying, so you have the ability to collect payments easily. Customers can enter their credit card information or bank information and your payment processor will handle collecting the payment for you. The collected payment is then deposited into your business bank account.
What to include on an invoice
Invoicing tools will usually have template you can use/modify, but you'll want to include the following:
- Your name/company name and address
- Your client's name/address
- The invoice date
- The due date (such as net 15 or net 30)
- An itemized list of the services provided, such as the date, a quantity, and a price
Most online invoicing software will also allow you to add a logo so the invoice looks more professional.
Automate your follow-ups
Many invoicing products have an automatic payment reminder feature built in. If you haven't received payment by the due date, the software will send late payment reminders at 3 days past due, 7 days past due, or whatever frequency you set up. If a client truly forgot to make a payment, an automated reminder might help.
Anna Burgess Yang
Be aware of applicable laws
There are a few laws, in particular, that apply when you're sending invoices: the late fees you can charge and your recourse if your invoice isn't paid.
Late fees
In the U.S., limits on late fees vary by state. Some states have no maximum on late fees; others have limits, like 5% of the balance due. Additionally, some states require a grace period, or an amount of time after the invoice is due before you can charge late fees. This guide has a state-by-state breakdown.
If you provide services in multiple states and want to charge late fees, it can be tricky to keep track of what you're allowed to charge. You have to include the late fee provisions in your contract, which might mean updating your contract on a per-state basis or making state-specific changes to your invoices.
Because of this, I don't charge late fees on my invoices. It's not worth the hassle of trying to stay compliant across multiple states for the few times I've had to chase down a late invoice.
State-specific freelancer protections
Two states in the U.S. have specific legislation to protect freelancers from late invoices: New York and Illinois. The cities of Los Angeles and Columbus, Ohio also have such protections. Other states have similar legislation pending.
Under New York's Freelance Isn't Free Act, for example, freelancers have recourse with the state for unpaid invoices. Freelancers may be entitled to double the amount of the invoice in damages. Anecdotally, the threat of the law is usually enough for a client to cough up the money for the unpaid invoice.
I live in Illinois and have experienced this. A client was 17 days late paying an invoice. The contract was clear and the work had been delivered. I made him aware of the Freelance Workers Protection Act in Illinois and that I would be entitled to double the amount of the invoice. He paid it later that same day.
Even if you don't live in one of the jurisdictions, the law may still apply. Such laws are typically written to protect freelancers working in that jurisdiction and clients located in that jurisdiction. So if your client is based in New York, you may have a claim.
Of course, that leaves many, many states without any freelancer-specific protections. I'm a member of the National Writer's Union, which offers contract and grievance help for its members. If you're not a writer, you could look to join an industry-specific group that offers similar support. On your own, you would have to enlist an attorney, which costs money — just to collect the money you are owed. It's a terrible position to be in.
Minimize the risks of non-payment with proper invoicing
Like any freelancer, I've had issues with late payments and non-payment. If a client is truly terrible, sending a nice-looking invoice isn't going to change that.
But a professional invoicing process will make some clients take you more seriously, especially at the start of the relationship. When you demand a contract and send professional-looking invoices, you're sending a message that you take your business seriously. You're also making it very clear what you are owed and when so that if you have a situation of non-payment, you have records to support your claims.
Plus, an invoicing app will help you provide more payment options to your clients. You never want to make it harder for clients to pay you: they should be able to make a payment, using their payment method of choice. The easier it is, the more promptly you'll be paid, and the better for your business and cash flow.
Check out my free eBook: 17 Smart Tools Solopreneurs Need to Start, Grow, and Scale.
This article is for informational purposes only. It does not constitute legal or financial advice.
