An invoice is one of the most important documents that your company can create. You can think of it as your comprehensive accounting paper trail—the details two parties need to do business with one another. Let’s start with a simple definition:
An invoice is a document given to the buyer by the seller to collect payment. It includes the cost of the products purchased or services rendered to the buyer. Learn about the purpose, origin, types, and elements of an invoice. Acceseaza-ti contul 2invoice pentru a emite facturi, chitante si alte documente contabile.
As a transactional tool, an invoice is a bill for an account between a buyer and a seller indicating what was sold, and how much is owed. 1password 6 safari extension. They’re used for account-based transactions between vendors and sellers who work with each other on a regular basis. You can use invoices to keep track of how much your customers owe you in total, as a basis to monitor your cash flow.
Invoices are like most bills in that they’re issued from a vendor to a customer for something they’ve already received, something in development, or something that’s ready to be created. But invoices, unlike a restaurant bill, aren’t necessarily due immediately upon receiving them. You may choose to set invoice payment terms of up to 3 months, to give your customers flexibility to manage their cash. Here are some tips to help you set up your invoice.
Invoice Structure: Details to Include in Your Invoice
Unlike a W2 form or any government-issued tax document, invoices aren’t standardized. The invoice you get from one contractor might look a bit different from the invoice you get from another.
But all invoices are built of the same building blocks, with the following components:
- Your business’s name, address, email address, and phone number for contact
- An invoice number for record keeping, to establish a paper trail of information for yours and your customers’ accounting records
- The date of completed service
- A description of services, to a level of specification that describes what you provided at the unit level
- How many units your customer ordered
- The rate per unit
- The total number of units
- A total amount owed
- Any tax that your company needs to apply to the amount due
Here is how all of these details come together into a sample invoice:
Accept payments by credit card or bank transfer right in the invoice. QuickBooks automatically matches payments with invoices to save you time.
How to Make an Invoice
Thanks to accounting and invoicing software, you can create invoices using automated templates. Using tools like an invoice template, sellers can quickly input information to keep invoices simple and easy to track. Here are three easy ways to create an invoice:
1. Use this free invoice generator tool to create and export an invoice.
Download your professional invoice template for free
3. Use QuickBooks to generate invoices and accept payments.
Tips to Consider When Creating An Invoice
No two invoices are alike, but there are some general tips you should keep in mind when creating your own to ensure both parties are clear on what the expectations are on how and when payments should be received.
1. Ensure Product Descriptions Are Easy to Follow and Understand
If you are a services company, make sure to include a title of your project, as well as a description of the activity that you perform.
If you’re selling a range of products, include your SKU or product ID in the itemized list on your invoice.
2. Create a Purchase Order
A purchase order is the contract between buyer and seller agreeing to purchase whatever goods or services are being bought. For example, if a local coffee shop agrees to buy five cases of espresso from their favorite distributor, they might sign a purchase order when they buy the product, and the distributor will issue an invoice upon receipt of the coffee. In general, an invoice is issued by the seller, and a PO is issued by the buyer.
Choose invoicing terms that maximize your cash position and likelihood of getting paid. You may choose to collect 50% upfront or require immediate payment upon completion.
Then, you can decide how long your customer needs to settle an invoice. One of the most common payment terms, Net 30 days (or “N/30″), means that a buyer must settle his or her account within 30 days of the date listed on the invoice.
It’s important to remember that 30 days is not equivalent to one month. If your invoice is dated March 9, clients are responsible for submitting payment on or before the 8th of April. Businesses may also set invoice terms to Net 60 or even Net 90, depending on their preferences and needs. You can learn more in this guide to choosing invoice payment terms, here.
For more information on how to use invoices in your business, check out these articles:
There are plenty of things in the business world that are more frustrating than dealing with a past-due invoice, but few that are more irritating. It’s the principle of the matter that really grates.
You’ve reached an agreement, and done the work. You deserve to get paid as promised.
What’s more, it shouldn’t be that hard for a client to pay what they owe.
They need only to dig up the past-due invoice, pay it using whatever payment method they prefer, and move on. With the proliferation of easy online payment tools, how is it freelancers still have to battle with past-due invoices?
Unfortunately, despite all of this, late payments remain quite common across all disciplines and fields.
If you’re a freelancer, then there’s an excellent chance that you’ve had your difficulties with a past-due invoice—most likely on far too many occasions.
In the end, you need to chase the clients responsible. You need emergency fallbacks for when those clients don’t seem overly eager to justify their sluggish response times. When something has gone wrong, someone desperately needs to right the ship.
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For most people, though, past-due invoices can be extremely delicate matter to approach. They worry about being too forceful, or too agreeable — too passive, or too proactive.
They imagine saying the wrong things and somehow sinking their reputations, scaring their clients away.
As a result, they often end up letting offending clients get away with their delaying tactics, which of course just exacerbates the problem by showing that there are no consequences for letting an invoice get past-due. So how should you handle this issue when you’re left waiting to be paid? Ilocalize 4 1 intelkg download free.
In this article, we’re going to detail what past-due invoices involve, how you can avoid needing to deal with them, and how you can make your responses as good as possible when they’re necessary.
We’ll also set out some example scripts to use in order to effectively get paid for your past-due invoices as quickly as possible.
What is a past-due invoice?
As I noted in the intro, a past-due invoice is an invoice that was sent out to a client but hasn’t been paid past the due date.
An invoice will usually involve a summary of the charges, a list of payment options, and a set of terms detailing when and how the payment should be made.
It should also have an outline of the penalties the client will incur by failing to meet those terms: you may charge a certain sum for each week after the due date with no payment, or even reserve the right to stop all work for that client with no notice.
If you’re completely new to the freelancing world (or you’ve only done informal projects with cash payments) then you should get familiar with the format. Look for some example invoices — or businesses creating invoice templates — to build up a basic understanding.
Regardless, this isn’t a special type of invoice.
Past-due invoice is just a label you place on an invoice when the circumstances demand it — a label that can be very useful when monitoring your company’s financial performance, because you need to know what you’re still owed.
What is the difference between a past-due invoice, an overdue invoice, and an outstanding invoice?
From the time that you send an invoice to the time that it’s paid, it’s considered an outstanding invoice. If the due date passes and the invoiced payment is still outstanding, it becomes a past-due invoice.
This normally sets alarm bells ringing and prompts a suitable response.
As for an overdue invoice, it really depends on your use of language. Most commonly there’s little or no difference between past-due and overdue, so you can simply use whichever one you prefer.
In the context of this article, though, we’re going to treat them as distinct.
Here, I’ll be using overdue to refer to invoices that are not only past-due but also very late: past-due invoices that have lingered on long enough to make direct action necessary.
Consider that a past-due invoice might only be a day late, but an overdue invoice might be a month late.
Ways to prevent late payments
Even just one late payment can be extremely damaging to your business, particularly if you’re having difficulty keeping your cash flow positive: it can cause you to miss outgoing payments, leading to a domino-style chain reaction that leaves you in dire straits.
Because of this, while there are some good ways to handle past-due invoices (and we’ll get to them), the best thing you can do is ensure that as many payments as possible are made on time.
Here are some core suggestions for improving your chances of getting paid promptly and avoiding a past-due invoice:
- Be firm with clients from the outset. Start as you mean to go on, as the saying goes. It’s understandable that you’d want to accommodate a new client, but if you tolerate a lack of professionalism early on, it’ll cause you problems later.
- Make it as easy as possible to pay. There are businesses out there that still require their clients to process their invoices manually, even though it isn’t difficult to provide an online payment setup with the sum already filled and options like JotForm, PayPal, and others on the table.
- Provide physical and digital copies. Some companies get so many emails and pieces of digital correspondence that messages can easily be lost. By covering both bases, you can make it less likely that your invoice will simply be missed.
- Maintain good lines of communication. If you sent an invoice several weeks ago but you’re not sure if it was received (and there are no extenuating circumstances), then there’s a problem with your client communication. Speaking to the client on a regular basis will allow you to casually mention the invoice and get confirmation without risking conflict.
- Stop working with flaky businesses. No matter how hard you try, there will always be clients utterly determined to take advantage of your good faith. When it becomes clear that a client is unreliable, stop working with them, and start looking elsewhere.
How to deal with a past-due invoice
Even if you follow all of the suggestions we just looked at, and make a habit of dropping clients that consistently fail to pay on time, you’ll surely have the occasional need to chase a client about its apparent ignorance of a past-due invoice. Let’s go through some advice for this:
How to collect a past-due invoice
Your first target when dealing with a past-due invoice should be to get confirmation from the client that it has the invoice. Once you have that, you can ask why it hasn’t been paid, and when you can expect the situation to be suitably resolved.
Reach out through whichever channel you normally use, whether it’s Slack, email, or VoIP. If it’s a local relationship, you can even visit them in person, though be very careful with this: you don’t want it to turn into a heated confrontation.
Whenever you talk to them, try to get one step closer to a resolution. If there’s no progress being made, or it’s far too slow, then you’ll need to escalate the matter (we’ll address this more when we reach the example scripts).
Sometimes it proves effective to send out a further invoice as a follow-up. It should structurally be quite similar to a standard invoice, except various elements can be omitted: you don’t need the preamble, for instance, as they should already be familiar.
The specific arrangement is up to you, and should depend on the client you’re dealing with, how your company normally operates, how much money is on the line, how badly you need to get paid, and how important the business relationship is to you.
How to keep it professional when asking for late payments
The best thing to do when a client misses your invoice deadline is take a deep breath and consider the situation. How soon do you need the money? How responsible has that client been in the past? A missed payment isn’t always the result of negligence or indifference.
If there’s a chance that there’s been some miscommunication — perhaps your invoice was never received, or someone in your company unintentionally gave the impression that the due date wasn’t serious — then you mustn’t do anything rash. It could make things worse.
You should certainly never respond in kind to unreasonable behavior, because your other clients may end up hearing about your actions. Even if you ultimately have to stop working with a client, you can end the relationship calmly and fairly.
There’s a chance (however minimal) that a negligent client will eventually shape up and need help again, and there’s no sense in burning bridges. It can be hard to consistently source work as a freelancer, after all, so be a consummate professional at all times.
Payment reminder email scripts
As noted earlier, you can reach out in whichever way you prefer, but the most common approach is to use email. It’s convenient, effective, and makes it easy to save time through using and adapting templates — and if it doesn’t work, you can try something else.
I’m going to set out some example scripts to give you some idea of how you can challenge clients about their slow payment: one for payments that are almost late, one for payments that are late, and one for payments that are very late.
Note that these are merely my suggestions, and you might wish to go in a different direction. Everyone has unique preferences for client communication. Read through my invoice chase scripts, check out these general scripts for unresponsive clients, and reach your own conclusions.
Email script prior to invoice due date
Invoice #12345 nearing due date
Hey [CLIENT NAME]!
How’s it going? I hope all is well with you.
I don’t mean to bug you about this (and you’re probably on top of things), but I just wanted to check that you’ve received the invoice I sent you on [DATE].
As a reminder, the due date is next week. It should all be in line with what we discussed, so if there’s anything that doesn’t seem right, could you let me know ASAP so I can fix it?
You can reach me here, or over the phone, or through Slack: however you prefer ?
Thanks!
[YOUR NAME]
Explanation: as the first chase, this email can be short and simple. Since it’s ahead of the due date, I nod at that by saying I don’t mean to bug them. When I bring up the possibility that the terms of the invoice doesn’t seem right, I take full responsibility by saying “so I can fix it” (even though the issue might be their fault).
I then offer various communication options on the basis that some people just don’t like having business discussions through email. If I can get them on the phone, I can have a fresh chance to patch things up.
Email script when you have a past-due invoice
Invoice #12345 now past-due
Hi [CLIENT NAME].
I emailed on [DATE] about an unpaid invoice (sent on [DATE]) that was approaching its due date, but that due date has now gone by.
Is everything alright on your end? If you’re busy dealing with other things, I completely understand that paying an invoice could be a low-priority concern for you, but it’s absolutely vital for my business that I keep my finances under control.
I also need to remind you that I charge late fees, so your payment sum will keep increasing while the invoice remains unpaid. I don’t want to charge you more than I need to!
Can I do anything to speed things along? Do you need a fresh copy? Let me know what’s going on!
Thanks,
Invoice3203164
[YOUR NAME]
Explanation: after recapping the situation, I first go to concern for the client’s situation, framing the issue as something they’re facing instead of something they’re outright responsible for. I then raise the matter of late fees, but try to make it feel less demanding by noting that I don’t want to charge them more.
Email script when it’s overdue
URGENT: chasing overdue invoice (#12345)
Hi [CLIENT NAME],
I’ve sent you several emails in recent weeks about an unpaid invoice (#12345), but received no reply. This is obviously concerning for me: as a freelancer, I need my clients to pay on time so I can cover my costs and focus on doing the best work I can.
Since the due date, the payment owed has grown by [AMOUNT] due to the late payment fees that were clearly agreed ahead of work commencing. The longer this drags on, the more that charge will increase — and as I said before, I really don’t want to charge you more.
I’ve attached a fresh invoice covering invoice #12345 and the late payment fees incurred so far. Can you confirm when you can issue the payment? There are several payment methods listed on the invoice, but if none are viable for you, I’m sure we can arrange a fair alternative.
As ever, if you prefer to discuss this outside of emails, I’ll be glad to use an alternative medium. If you remain unresponsive, I’m sorry to say that I’ll eventually consider taking legal action (I’ll avoid it if I can, but I can’t stay in business if I let payments slip away).
Despite this blip, I’ve enjoyed working with you, and I really hope we can get this resolved soon so you can stop getting these emails and I can get back to work!
Looking forward to hearing from you,
[YOUR NAME]
Explanation: at this point, the invoice is well past the due date (possibly months late), so it’s time to be considerably firmer. My first aim is to inspire empathy by noting that I need to cover my costs, making it clear that I’m not so wealthy that I don’t need the money.
I restate the point about late payment fees, only more forcefully. I then touch upon the prospect of legal action, though I make it clear that I don’t want to take that route, and present the overdue invoice as a blip that can still be fairly resolved (it isn’t too late to fix everything).
Be firm, and know when to walk away
Wrapping up, there are two main takeaways you should remember. Firstly, it’s essential that you don’t let your clients get away with unprofessional conduct.
You should be understanding, of course, but if they aren’t justified in delaying payment then you should put your foot down.
Invoice 3 Way Match
Whether you’re bringing up late fees, disrupting ongoing work, or simply taking a strict tone in requesting payment, you need to show that you’re willing to stand up for yourself and the integrity of your business.
Secondly, you should know when to walk away. Sometimes you’ll do a small piece of work for a client, only to see them make no effort to pay you no matter how hard you try to communicate with them — and it might not be worth escalating the matter.
If you think you’d pay more in legal fees than you’d ever get back from a troublesome client, then simply move on from the matter and resolve to find better clients.
Work hard to vet your prospects, and that should mostly protect you from payment problems.
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