Getting paid is critical to your business: today I’m sharing tips on how to handle invoicing in order to avoid cash flow issues. Be sure to also read part 1 of this series!
Get paid before doing the work
If you feel your customer may close overnight (eg: young startup without funding), it may be a good idea to only do prepaid work — otherwise you may be the next shop to close.
I usually only ask for prepayment (eg: 30% upfront) for large projects which may take some time to take off .
Some people I know have been bitten by unpaid invoices in the past though, and only work in prepaid mode now — so definitely consider this option if you work with risky clients.
Obviously and even if you do not fear a fragile customer, charging beforehand is excellent for your cash flow.
Track your time and expenses religiously
If you bill by the day/hour/week, make sure to track your time carefully and to pick a tool that allows you to do it very easily, otherwise you’ll just underestimate how much you work, and you will just leave money on the table.
It’s equally easy to forget travel expenses if you have some: make sure to group your receipts early on to avoid issues here.
I use Freckle to track my billable and non-billable time, so I bill exactly what I worked, plus I get an accurate picture of how much I work each week (including administrative tasks).
Again: as I advised in part 1, do not work on fixed-price projects, unless you have a super reliable estimate of what is involved (eg: a kind of work you did multiple times, with the same people and in the same environment). As a rule of thumb: don’t do it!
Make sure to invoice your customers on time
When you are hard at work, it’s easy to lose track of time and delay the moment when you’ll emit those invoices. Doing so truely is looking for trouble.
By invoicing just a few days later, here is what could happen:
- things become not so fresh in your head anymore, and maybe you forget to add expenses to the bill,
- your customer gets an extra unexpected tax to pay, right before they get your invoice, and your payment becomes delayed,
- the person usually handling invoice payments goes on holidays.
So do not wait and invoice as soon as possible!
No matter if you bill monthly or at a different pace, make sure to have a system (eg: reminders) in place so that you always invoice your customers right on time.
You can for instance use WiseCash’s dashboard as a reminder for invoices to be emitted:
Make it dead easy for you to invoice your customers
Since emitting invoices late is a bad idea, you’ll want to find a solution that helps you do it very quickly to make sure you are on time. I also use Freckle for that purpose, but there are plenty of tools to achieve this.
Make it quickly, send it quickly. Get paid quickly!
Make it dead easy for your customer to pay you
Similarly, if you make an invoice, make sure everything the customer needs is on the invoice in clear shape:
- why do they receive an invoice? (eg: “Rails consulting”)
- which period is being invoiced?
- how can they send you the money? (bank account references, …)
Each invoice should be self-sufficient.
Take care of late invoices
You’ll want to setup a process to make sure you follow up on your invoices (I do use WiseCash dashboard for that purpose too).
When an invoice remains unpaid for some time (eg: one week), get in touch with your customer to understand the issue without delay.
If you build quality relationships, then your customer will usually be quite transparent about what is happening, no matter if the invoice has been just forgotten, or if there is a temporary cash flow issue etc.
In all cases, never let a customer have more than one pending invoice (just stop the work otherwise).
In the next episode, I’ll share more tips to improve your cash flow as a freelancer. Stay tuned!
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