Many business owners, sole proprietors, and freelancers use an invoice to request and receive payment for services rendered. This invoice is a professional document that service providers can send to their clients to bill them for the hours or projects worked.
To learn how to create an invoice, it’s critical to know the factors to consider when invoicing, the key details to include, the terms and timeframe of payments, and the answers to frequently asked questions.
Factors To Consider When Invoicing
What you include on an invoice can depend on a few key factors, such as:
- The type of clients you work with: While larger companies may require a professional, well-detailed invoice in a specified format, newer, smaller businesses may be more open to accepting a variety of invoice types.
- The type of work you do: The information you include on a service-based invoice can depend on the type of services you offer. For example, a lawyer’s invoice may include different items than the one a photographer will send.
- Billing preference: Do you bill by the hour? Or do you prefer project-based fees? A provider who charges, say, $50 an hour and works 25 hours a week will create an invoice billing the client for $50 x 25 = $1,250. Alternatively, a freelancer who charges $125 per project and completes 10 projects will bill for $125 x 10 = $1,250.
- The client’s preferences: Some clients insist on numbering the invoice a certain way, while others need a business address. This information may be necessary for processing payments.
Knowing your client’s invoicing preferences can help you avoid unnecessary back-and-forth resulting in delayed or canceled payments.
What To Include on an Invoice
Having a detailed, accurate invoice is crucial for timely payments. So how can you make sure you are doing everything correctly?
Here’s a handy list you can follow to ensure you have all the right details on your invoice:
- Your business details: Business name, employer ID number, and contact information
- Client’s information: Their business name, address, and contact information
- Dates: When is the invoice being submitted? When is it due?
- Work details: Which projects are you billing for? Specify the name, type of work, time taken (if billing hourly), any reimbursement fees, etc.
- Amount: How much money is owed? Are you charging late fees?
- Payment details: How should the money be paid? Mention bank or e-payment information.
- Terms: What are your payment terms? For example, “a late fee of 8% is charged for every month delayed.”
Use an Invoice Template
Creating an invoice from scratch can feel challenging, especially if you are new to the process. Fortunately, there are several free invoice templates available online. Working with a template can help you minimize errors, save time, and create a presentable design. Here are some important steps you need to follow.
Find the Right Template for You
Look for invoices designed with your industry in mind. For example, if you are an accountant, look for invoice templates made for financial service providers. These may offer more suitable details and formatting features.
Also, make sure your invoice is easy to read. Prioritize readability over design. A simple black-and-white template with a clear font is better than a brightly colored one with tiny letters and unnecessary, superfluous features or designs.
Pay attention to colors and fonts in an invoice template. Bold colors and overly stylistic fonts may appear unprofessional in some industries.
If you are an independent contractor (freelancer) who uses service-based invoices frequently, make a list of suitable invoice templates for regular use. You can use a spreadsheet or any management app for compiling links/editable PDFs of easy-to-read, industry-relevant templates. This will reduce the time you have to spend on administrative tasks.
Here are some notable options for free invoice templates:
You can also use free (and paid) software to generate service invoices. Here are some helpful resources to consider:
Format Your Template Correctly
Working with a template can be challenging at times because of formatting issues, which you need to resolve to make sure the final invoice is readable and presentable. Issues you may need to address include:
- Adjusting the font size
- Changing background colors
- Ensuring headings are appropriately capitalized
- Checking if the business logo fits well within the template
- Adding or removing any relevant sections
Enter Your Information
This is where the primary work begins. Once you have found a suitable template and have correctly formatted your invoice, you can start entering your information. This will include the components mentioned earlier (business name, amount, payment details, etc.).
Include the Client's Information
The client’s information including their business name, office address, contact information, etc., is included at the top of the invoice. Here’s an example:
The XYZ Company
Include the Invoice Number and Issuing Date
Make sure you include the invoice number and the issuing date on your invoice. This helps with tracking payments manually or through online payment management software. These details can also come in handy if an invoice slips through the cracks while being forwarded between departments.
You can number the invoices directly in the order of issuing (001, 002, etc.) or use a specific system to help you track (101 onwards for A company, 201 onward for B company, etc.).
List Services and Payment
This is perhaps the most important section of an invoice. You get paid for the services/time/projects you list on your invoice, so make sure this section is 100% correct.
Start by making a list of all the work you have completed (in the specified time period for this specific client). You can list this per project or per hour. Here are two examples.
- “Wrote 1,500-word article on home rentals for $600 (project-based)”
- “Conducted research on home rentals for 3 hours at $200 per hour = $600”
After you have listed all your services/projects/hours, include a grand total of the amount owed at the bottom of this section.
Service and payment details like the ones mentioned above are listed below your and your client’s business information. They are often highlighted and appear at the center of the invoice for quick reading.
It can be helpful to mention the dates of when the work was assigned so your client can easily track and pay for the work completed.
Next, include payment options. This can be your bank information for deposits and wire transfers, address for check payments, e-transfer IDs or online billing info for digital payments, and any relevant details that will help your client pay on time. This information can appear at the bottom of the invoice or be discussed beforehand in a contract or an email agreement.
Discuss When the Invoice Should Be Paid
Most service providers don’t get paid the same day of sending the invoice. In many industries, like freelance writing, for example, payment depends on the hiring company’s terms. Many companies adopt a net 30 or net 60 policy in which contractors are paid within 30 or 60 days of receipt of the invoice.
However, in some industries, contractors hold the right to negotiate payment terms. For example, a doctor may demand an advance payment invoice be paid before an appointment.
When the invoice is paid often depends on the working relationship between the hiring company and the contractor. For instance, if you are an established professional in your industry, you may have the leverage to demand advance payments even if your peers get paid according to the company’s terms.
Frequently Asked Questions (FAQs)
What jobs use a service-based invoice?
While any service provider can use a service-based invoice to bill their clients, here are some of the most common professions that use a service invoice:
- Freelance writer
- Freelance accountant
When is the right time to send an invoice?
The best time to send an invoice depends on the policies laid out in your contract. Some companies accept invoices on submission/completion of work (handyman, freelance writers), while others may accept it before the work has even begun (doctors, lawyers, etc.).
How long should it be until I get paid for the invoice?
When you get paid depends on the terms agreed upon by you and the client. Some companies pay after 30 to 90 days while others may pay immediately (within 24 hours). Make sure you negotiate this before beginning work.