In any form of business, it is crucial to keep a record of every agreement and every transaction. It is required for not only accounting purposes but also for an in-depth analysis of the financial health of a venture. From freelancers to MNCs, all are advised to maintain such records.
Now, the first and the most foremost step is to generate an invoice. In these hi-tech times, this is mostly done by free invoice generator tools like Refrens. When an invoice is built correctly and efficiently, the payment procedure becomes a little too smooth. As it saves a good chunk of time by speeding up and automating the process of invoicing.
The client will be better able to check all of the different charges and expenses with the aid of a well-designed invoice. However, just generating an invoice is not enough. The next step is to send that well-crafted invoice in time to your client.
Again, timing is of the essence here. When you send an invoice, essentially determines your cash flow cycle and hence, working capital heavily depends upon it.
It ought not to be too soon nor too late. As an early one would raise suspicion of some wrongdoing. On the other hand, if it is too late, the invoice may be rejected or a penalty may be applicable. So, the bottom line is it has to be sent on time.
For some recurring clients, some organizations use a monthly billing method. Clients in these cases have an arrangement with the firms in which they pay according to both sides’ convenience.
A model, where the consumers are urged to renew their subscription annually or quarterly, or even monthly basis, and pay the amount then is also used by a few small companies and MNCs like Disney, Netflix, etc. Here, they send invoices to their regular customers periodically, which are paid by the client at their convenience.
Ideally, there are two basic options while sending an invoice, send it:
- before completion of the task
- after completion of the task
Deposit Invoice: Sent before the completion of the task
This is an ideal invoice for new freelancers, as funds from deposits can help you kickstart your work in this project. Invoicing before completion of the task is known as deposit invoice.
If your work requires you to order a bulk of material to get the work started, invoicing before completion of work is the way to go for you.
This method is typically used by shipping companies, large construction companies, and other businesses that require raw materials and/or equipment to get started.
This raises the likelihood that your consumers will view the entirety of your effort. Billing before the task is finished offers you the assurance that your clients aren’t backing out or going in the opposite direction until the very end.
However, there may be times where this is not suitable as the cost of raw materials or other required stuff may fluctuate. In that case, if the costs spike up in an unfavorable direction. It may shoot up your cost of production which then will not be bearable by your clients.
Total Invoice: Invoicing after the completion of the task
The most typical manner of business is invoicing after the completion of work, and the total amount invoiced is what clients should expect as their final payment after receiving their job. It informs the consumer that their job has been completed and establishes trust between you and the client.
Invoicing following the completion of the work also assures the client that there will be just one set invoice, rather than many invoices with varying values. Invoicing once the job is completed can be done within 24-48 hours or by submitting the invoice together with the work.
Instead of billing on the spot, contact or email your client and ask them to check your work and confirm their pleasure. Invoicing your customer would reflect well on your job and raise the likelihood of them engaging you in the future.
However, if you have a lot of work lined up, this technique of invoicing isn’t ideal because it’s tough to track down outstanding bills from clients. This is also a terrible concept for new firms since they would have to cover expenditures with personal assets, which does not ensure a return.
Bonus: Last option!
Whether you invoice them before or after work, make sure the payment conditions for your project are mentioned in the legally binding contract.
Getting paid before and after work is the easiest approach to obtain some extra job. To do so, be sure to seek a prepayment of 25-30% of the project’s entire cost. Initially, this should be sufficient to purchase equipment and materials. Then decide on a final payment that will cover the project’s completion.
How far can I push the deadline for sending an invoice?
The best time to invoice a client is determined by your connection with them, your company strategy, and your cash flow. There is no set deadline for submitting a late invoice.
Various polls indicated varied results, but the majority concluded that Monday or Tuesday are the best days to send bills, and even on those days, the optimum time to submit an invoice is in the morning since it increases your chances of being paid that week or even that day.
The goal is to send these bills when everyone is at work or on their way to work, reading their mail and messages. The likelihood of their seeing and reacting to your invoice messaging increases dramatically.
Invoices almost often indicate that payday is approaching. However, it is the most important step in the payment process, and the time of sending invoices should be front of mind since, if done correctly, it boosts your chances of getting paid as quickly as possible.
An invoice cannot be sent on a certain day or at a specific time. Choose the approach that best meets your needs and workflow, as well as those of your client. You likely employ various strategies with each of your clients if you have a lot of them. Though try to streamline one method of invoicing to increase your efficiency.
As different methods for different clients can be sometimes a little haphazard to manage which may lead you to send wrong invoices to your clients and if you want to stay in the game for the long run, you don’t want that.
Hence, the trial and error method is the way to go when it comes to selecting an appropriate time and method of sending an invoice.
Hetvi works as a Product Associate at Refrens.com – Online Invoice Generator & India’s most powerful platform for freelancer’s growth. She has worked for some renowned companies as a Brand and Digital marketing associate. You can follow Refrens.com on Twitter, LinkedIn and Instagram.