Basically, cash flow is how a business stays alive. Sending out those invoices and getting paid is one of the most important stages for business owners.
Depending on your situation or service, it’s important to know the right moment to hit send and release your invoice into your client’s inbox. Nailing your timing can be the difference between you being perceived as an amateur or a professional.
In this article, we’ll hand you some tips for when to invoice clients.
There are three main periods you can send out an invoice:
- Invoicing upfront
- Invoicing in increments
- Invoicing at the end of a project.
Invoicing upfront: Pros and cons.
Charging upfront is a common way for businesses to ensure they get paid. Also, most business owners aren’t usually comfortable with this method. But as you’ll see it offers some benefits.
However, we’ll give you the pros and cons to help you make a better decision.
- Ensures you get paid. Getting paid upfront is a sure fire way to prevent late payments. The major resistance you’ll get is because of trust. To fix this, you can offer to receive partial payment upfront. Many clients may not be comfortable paying you upfront for the first time.
- Boosts your cash flow. Like we said earlier, businesses need money to survive. Charging upfront prevents yours from running out of it during a project.
- Clients may want to micromanage you. Charging upfront can make many clients anxious causing them to get too involved with the project. This is usually frustrating because it leads to interruptions and unnecessary changes along the way.
Invoicing in increments
With this option, you can break up payments over a period of time. All you have to do is set up a total number of milestones. Then, send an invoice the moment a milestone is completed. It’s a great way to have steady cash flowing into your business.
Invoicing at the end of a project.
This is the final option to get paid for your work. Charging at the end of a project ensures you have enough control over the project. However, it poses a lot of risks. For example, it creates lackluster clients that delay for weeks before sending a payment. This causes you to spend extra time and sometimes resources creating and sending payment reminders. But the biggest problem of all is that a payment delay can reduce cash flow into a business.
How often should you invoice clients?
Your billing frequency really boils down to the type of service you offer and a few other factors. These factors determine how often you can send out an invoice.
Let’s dive into each one.
Number of clients.
A large client base requires you to bill monthly or bi-monthly. Imagine trying to send an invoice to 20 clients at different periods. Instead of having time to work, you’ll likely spend a large part of it on tracking payments. Billing clients monthly ensures you have fewer payments to track and manage.
Some clients provide small projects that can be done quickly. Others provide larger ones that can be a lot more demanding. If you have multiple projects, you’ll need to break up the invoice into increments. This way, your time is respected and you get paid faster.
Your monthly expenses.
It’s pretty straightforward. You’ll need to take a look at your monthly expenses and come up with an income that allows you to take care of them. If billing weekly is right for you then go ahead with it. It all comes down to knowing the right amount you need each month to avoid debt.
Your invoicing method
Most businesses today use electronic invoicing. If you’re like them, then the entire billing and tracking process will go smoothly. On the other hand, settling for manual invoicing will delay your payments longer.
Avoid these invoicing mistakes
Delivering great results and getting paid for them is top of mind for every business owner. Dialing in on your invoicing process ensures you receive timely payments each time an invoice is sent out. However, some common mistakes come in the way and prevent that from happening.
Here are few you should avoid:
- Delaying to send out an invoice
- Sending your invoice to the wrong person.
- Not following up with clients after sending out the initial invoice.
- No multiple payment options so clients can pick the ones they’re comfortable with.
- Setting unclear terms that can confuse the client.
Avoiding these mistakes improves your chances of landing your payment on time. This in turn, injects cash needed to keep your business healthy and growing.