Freelancing is an exciting gig full of lucrative career development opportunities. It is also fraught with difficulties when it comes to financial stability, tax filling, and keeping track of invoices.
According to Leftronic, 66% of freelancers find their work online, while 45% feel more secure in the industry in 2020 than in the year prior. Moneywise, 99 Firms published findings where 31% of freelancers earn $75,000 a year; however, 30% make less than $10 an hour during their first year.
While content writing, graphic design, or web development may be industries that pay off in the long run, invoicing clients remains a challenge for many. To avoid legal issues and to be able to charge your clients for the work you do, writing freelance invoices should become the norm.
In this article, we’ll discuss what goes into writing a first freelance invoice yourself, as well as how you can make the process easier going into 2021 and beyond.
However, before we tackle DIY freelance invoice writing, it’s worth touching on the available software solutions dedicated to this particular matter.
The Benefits of Using a Dedicated Invoicing Platform
If you’re unfamiliar with finance and legalities, bookkeeping and invoice writing can be difficult, and you are bound to make mistakes. Fortunately, professional accounting software can help ease you into invoice writing and freelance bookkeeping.
Some of the long-term benefits you can look forward to if you choose to rely on a dedicated accounting platform rather than manual writing are:
- Precise and up-to-date books in regards to your freelance projects
- Dedicated bookkeeper who will monitor your account and advise you
- Automated monthly delivery of reviewed transactions
- Taxation-ready report delivery based on your needs
- Save precious time and resources each day and focus on your work
Top Tips for Writing your First Freelance Invoice
Now, let’s delve into the steps and tips for writing a proper freelance invoice the right way.
In order to make the guide as comprehensive as possible, we will assume that you are writing your freelance invoice from scratch. Doing so will allow us to cover all the basic information needed to properly create an invoice and send it to a potential client.
1. Outline your Invoice Header
To start, you should design your invoice header with the information about your business/legal name. If you are a solo freelancer working from home, this section can include your professional correspondence information. Use a sans serif font, 10-12pt, and make sure that all of your information is up-to-date and valid for bookkeeping purposes.
If you’re working as a legal body, you can add your logo to the header. Writing tools such as Evernote or Grammarly can be useful in order to avoid proofreading or formatting errors in your invoice header. Once you’ve defined your header, this section of the invoice can be saved for future use and standardized as part of your freelance invoices.
2. Add Client/Contractor Information
Once you’ve outlined the details about yourself, you should dedicate a section to your client’s business information. Whether you work with a company or an individual client, their invoicing information format will be the same. You can follow a standard invoicing format in regards to this section of the document:
- Client name:
- Client address:
- Client PO Box:
- Client email:
- Client phone number:
- Client website:
- Additional info:
This section of the freelance invoice is just as important as your own information. Your bookkeeper and bank will use the information to clearly track the transaction between two parties and help you tax your earnings easily.
Double-check your client’s information if you are unsure about any details since editing invoices once they are submitted is very difficult.
3. Include an Invoice Code and Details
In short, an invoice number will allow you to keep track of how many invoices you’ve written over time. Invoice number is more useful to you than to your client, but it is still an essential part of your freelance invoicing.
If this is indeed your first invoice, you can start the sequence in a number of simple ways: 001, 0001, 1001, etc. Likewise, if you provide a variety of services for your clients (software development, web development, etc.), you can use multiple invoicing sequences.
For example, invoices starting with “1” can refer to software projects while “2” refer to web-based projects. You can make the codes easier to track by adding small 1-3 word titles of whatever service you provided for that client. For example, an invoice code can look like this: “1001 – software QA testing”.
If you’re unsure about how to properly structure your invoicing codes, it’s best to consult an accountant to avoid legal miscommunication or taxing problems later. Or, you can use a dedicated accounting platform to alleviate much of the problems with writing your first freelance invoices altogether.
4. Outline Date Prepared/Due
Following your invoice code writing, you should outline the dates in which you’ve written the invoice, as well as when the payment is due.
While this might seem like a rudimentary section of the document, pay close attention to it. Both yours and your client’s bookkeeper will want to have precise information on when the invoice was written compared to the project’s conclusion. Likewise, the due date for the agreed payment should be mutually agreed on between two parties.
Even a small clerical error can put your invoicing behind by weeks. Keep a close eye on the dates relating to your contractual obligations and make sure they align with the payment reports you submit to clients. Once you fall into a pattern of diligently tracking time, freelance invoicing will become second nature to you.
5. List Available Payment Options
Your invoice section regarding the available payment options should be as clear as possible to avoid any confusion with your client.
As a rule of thumb, you should make as many payment options available so that the client can choose the most convenient option. However, you can also pre-arrange which payment option will be listed on the invoice by consulting with the client.
Your options will typically include a personal or legal bank account, PayPal, as well as other digital payment options such as Payoneer or Skrill. Whichever option you choose, make sure to clearly state your account number so that the client can follow up on it and pay you.
Once you write this section of the freelance invoice once, it will be a matter of copying the information to future invoices.
6. Outline Agreed Contract Payment Terms
If you’re working on a long-term project, you may want to get paid in advance or in installments based on agreed terms. These terms should be outlined in the freelance invoice for the sake of transparency and easier bookkeeping. Following your section on available payment options, you should describe the terms of payment you’ve agreed on.
This can be a simple one-sentence explanation stating that you will charge 50% of the fee upfront and once again after the project’s completion. In case of more complex projects, you can outline each section of the project and charge different percentages in installments until the sum is paid.
Make sure that the breakdown of your payment terms is as clear and informative as possible so that there are no double-meanings. Consult a financial advisor for assistance if you have no prior experience with invoicing to avoid miscommunication with your client.
7. Highlight Total Amount Due for Payment
Writing freelance invoices is an exercise in patience – however, be sure to follow through with every detail.
Once you’ve outlined the terms of payment and your available payment channels, you should clearly state the sum you are owed. This will ensure that both your client and bookkeeper are clear on the breakdown you’ve provided for the work you’ve done.
The total sum due for payment can be highlighted in bolded letters or a square outline to add to its importance. It’s good practice to also write the amount you’re owed in letters as well as numbers to avoid any confusion on the sum.
The total payment due for your work is a piece of information equally important as every other on your invoice. Don’t treat any of your invoice details lightly, and make sure to go over each section thrice before submission.
Have an accountant or a financial advisor handy in case of more complex invoices or long-term payment plans to avoid potentially large banking errors.
8. Provide Formal Note of Gratitude
Lastly, you can cap off the freelance invoice with a formal note of gratitude to your client for their time and professional opportunity they’ve provided. This can be anything from a simple “thank you” to a more complex thank you note, depending on how long you’ve cooperated.
Thank you notes should be kept short and to the point since invoices are primarily financial documents meant for payment and taxation tracking. However, no one will stop you from extending an olive branch to your client and saying “thanks” for the work you’ve done together.
You can go a step further and mail your client the invoice physically in a quality envelope or on a special flash drive. This can improve your reputation as a freelancer and paint a very positive image of your professional conduct. But, these forms of gratitude should be kept for high-end clients so that you don’t splurge or go out of your way for each client.
Freelance Invoice Writing Mistakes to Avoid
As you can surmise, writing your first invoice is only difficult until you outline the basic information. Subsequently, you can copy/paste a lot of the information you’ve written down to make the invoicing process faster and more structured.
Despite that, there are several invoicing mistakes you should be aware of going forward in your freelancing career. Remember that invoices should NOT be treated lightly as they represent legal documents relevant to your bookkeeping and yearly taxation – pay close attention to them.
With that, let’s cap off with some noteworthy invoicing mistakes to keep in mind:
I. Writing but Not Submitting the Invoice
Depending on how adept you are at solo entrepreneurship, you may come across a situation where you forgot to submit your invoice. While not earth-shattering, failing to submit your invoice to the client will set back your payment by several days or weeks.
Make it a habit to review the invoice, sign it, and then send it to your client for payment approval as soon as it’s written.
II. Poor Service Breakdown
Based on how extensive and long-term your services have been, you will want to break the payment down as best as possible.
Itemize each type of service you’ve provided the client with, the hours you’ve spent, and any materials or digital goods you had to pay for.
Different freelance projects will require different item breakdowns, so take your time and describe each action you took and how much you charged for it.
III. Not Reaching Out After Invoice Submission
Lastly, your clients are undoubtedly busy with their own daily routines and business obligations to keep checking their inboxes ad addendum.
Once you send the invoice for approval, pick up the phone and reach out to your client. Ask about their day and how satisfied they are with your work before you let them know the invoice is waiting for their final approval.
Failing to follow up on your invoice can set your payment back again and cause you to wait even longer unnecessarily – be proactive instead.
While daunting at first, freelance invoicing is very doable from the comfort of your home office despite its legal nature. Be sure to approach invoicing in a systematic and objective manner from the start to avoid bookkeeping problems later on.
Again, if you want to focus on your freelance work entirely and leave invoicing to a third-party agency, you can do so without further trouble. Accounting platforms such as Less Accounting are designed with your continued financial stability in mind, so make sure to check out the pricing.
Be responsible in your freelancing career and keep track of your finances – the rest will fall into place sooner or later.