When I first started my business, the idea of invoicing for my services didn’t make me nervous — that is, until I got started and realized that I had no clue what some phrases meant. But, there’s good news: Invoicing terms for freelancers are quite simple once you’ve figured them out. Use this glossary of terms to understand the specifics to include on your invoices so you can send them out quicker and get paid faster.
Want to get paid? Then you’ll need your complete contact details on the invoice. Make it simple for the accounting department to pay you by including your email address and phone number in addition to your mailing address. This will save time if they have a question about the invoice and need to get in touch with you.
Also, don’t forget to put the complete details of your contact’s information on the invoice, too. The accounting department may need to get in touch with your contact to approve the invoice. Plus, it will keep you organized on your end, too. If you need to reach out for a missed payment, all of the information will be readily available.
There are a few important dates that go on your invoice. First, you’ll need to include the day the invoice was sent to the customer. Next, the due date is required, so your client knows what date to pay by. In some industries, it may be important to include the date when the services or products were provided. For example, photographers may want to include the date of the photoshoot.
What are you invoicing for, anyways? Make sure to clearly list a description of the goods or services for which you’re requesting payment. It’s smart to itemize your description. For example, if you provided a graphics suite for a customer, your invoice would list the logo, business cards, and social media templates separately — especially since they’re all likely to cost different amounts.
Estimates or Quotes
An estimate or a quote is an invoice that represents what your clients could expect to pay if they choose to work with you. It will often be itemized, so potential clients know exactly what they’re paying for and how much each item costs. The benefit of sending it as an invoice? The client can simply pay for it once the terms are agreed upon.
Each invoice deserves its own number to keep you organized — but don’t just start at number one. What happens when you get to 10 or 100? The system won’t stay in numeric order. Start with zeros, and you’ll be organized even when you’ve sent thousands of invoices. For example: 000001 would be your starting point, and you could then create invoices 999,999 other times all while staying in order.
Terms of Payment
Of all the invoicing terms for freelancers, the trickiest are those related to the terms of payment. Keep in mind that you won’t be using all of these on one invoice. But, with a diverse group of clients, you may need to know them all in case your contracts have different stipulations.
End of Month
Quite simply, “end of month” on an invoice means that it is due by the final day of the calendar month in which it was sent to the client.
Immediate Payment or Payment in Advance
Here are two other simple invoicing terms for freelancers: “Immediate payment” or “payment in advance” both mean that you expect to be paid immediately once the invoice is sent. This is typically used when payment is due before your products or services will be delivered.
It’s common to charge interest on late payments — just make sure that this is clearly stated in the terms. Interest is calculated on the number of days the invoice is late, not the entire payment.
Here’s an example: the invoice is $1,000, and you charge 5 percent interest on late payments. The payment is currently 21 days overdue. Follow this formula: Divide 21 (days late) by 365 (days of the year). Then, multiply that number by 0.05 (the interest rate), and multiply that result by 1,000 (the invoice amount). In this example, $2.88 in interest would be charged for that 21-day period.
Net 7, 10, 15, 30, 60, 90
Of all the invoicing terms for freelancers, this is the one that confused me the most. In an email, my first client said, “Make sure to indicate if the invoice is Net 15 or 30.” I was clueless as to what he meant. Luckily, the answer is rather simple: When you see “Net #,” the invoice is due within that many days. So, if you invoice a client on June 1 with a Net 15, the payment is due on June 16.
If you work on retainer for a client or charge a monthly subscription, it’s smart to send a reoccurring invoice so it’s both delivered and paid on time. Set these up in your accounting software to run every month at the same time, and reoccurring invoices will be a breeze for you and your business.
Terms of Sale
Terms of sale are the payment terms that have been agreed upon by both you and your client. These could include anything from word count for blogs, to shipping details for physical products. This section also includes any information about interest charges, late fees or other invoicing terms that have been previously agreed upon.