What invoicing structure do you use (creative and digital)?
As a relatively new creative digital business owner, I'm quite curious about how other freelancers and small businesses structure their invoicing. Do you separate a project into distinct sections and invoice for each section upon completion? Do you complete all of the work before invoicing? Or do you have another method that works for you?
If you could explain the benefits and negatives of your current structure and any pitfalls you may have experienced, that would be helpful.
You can do all of that. Personally, I send an invoice to my clients for 50% of the accepted proposal in the beginning, and will start on the project as soon as I receive notification the invoice has been paid. Then a second invoice upon completion and launch of the project.
Benefits: no printing, mailing, ink, no waiting on the post office to deliver the mail with the invoice because it is delivered immediately through email, and shows immediately in my account upon payment submitted.
Negatives: I haven't experience anything negative with any clients with this method, Works smooth. I don't believe I have ever had any pitfalls either.
As you know cash is king and you should try to get as much of it up front as possible. With large clients in matrixed organizations, you will often have to play by large-client rules. You may spend a couple weeks just to set up vendor profiles, obtain a purchase order and provide initial invoice with often 30-60 day payment terms. Even so, you can specify 50% deposit prior to work start and 50% invoiced on completion. You may also offer a discount, say 2% for early payment in 10 days or less.
When I begin to structure my creative projects, there are a few basics that I use as a rule of thumb for invoicing.
1. Initial Quote or Proposal - set clear an realistic expectations on completion date as well as detail of services to be rendered. Do include a clause within your quote that if client requests additional services throughout the project, the price will increase (prior notice to client on exact price difference should be communicated prior to moving forward - they might be or not be willing to pay extra for what they might feel is not worth the price ticket you set). If your client wishes to move forward, I suggest collecting anywhere from 50-75% as deposit off initially quoted cost.
2. You must make clear to the client that project will not be released until final balance is received (unless it's per-month maintenance project or prolonged process). I would do this more so with first-time clients as you do not know quite yet how ethical they would be about paying in a timely fashion. Bigger companies will ask for a NET 15-30 on the final balance. I would re-consider bending the rules a bit for your regulars or established companies, but always keeping in mind that no matter who it is there is some risk involved when releasing your project without receiving final payment.
3. If it's a longer project, I would break up your invoicing into monthly payments, depending on what negotiations works better for you, the client and the nature of the project itself. Be firm but cordial when setting deadlines for bill payments as the client will be firm with you on meeting their release deadlines.
Hope this helps! Feel free to ask any follow up questions.
As Nancy cited, it's always better for any business to invoice the section of business process once it gets completed. Rather piling up altogether and waiting for the invoices to be paid is quite a backbreaking thing, as you want to keep reminding your clients for the payments to be made.
Besides, you can also get the initial payment for when you are about to commence the work process (if needed). This might ensure a better deal. Perhaps, you can opt for a reliable invoicing software that serves most of your needs in getting your payment quicker like Handdy Invoices (handdy.com)
Hope this helps! :)
Both Nancy and Elaine have good insight. When it comes to billing them, I recommend using FreshBooks or another invoicing software to keep track of outstanding invoices and your progress.
I agree with Nancy. I always quote first and then invoice for the deposit. Once the deposit it cleared then you can start on the project. In the quotation process I make clear that the final version is sent or uploaded (in case of web design) after approval of proof and final payment.
Yes, you should divide the project up into phases. Invoice prior to each phase beginning and invoice for that phase upfront. At the very least invoice for an initial deposit. Some projects might not require multiple phases, such as a simple logo or graphic. Always be sure to provide a contract with the phases and anticipated completion dates for each phase.
Hope this helps!