An invoice is basically a bill for the work that you’ve completed or, if you require deposits, that you’re about to complete. In a nutshell, an invoice says, “Pay me.”

What to Put on an Invoice

Your invoice should include your name and email address, recipient’s information, a list of the work completed and price, date the work was completed, date the invoice is due, and payment methods.

I create invoices either through MacFreelance, an invoicing software for Mac, or Paypal when the client requests it. You could also use Word, Excel, or even your email client. If you have Jenn’s Web Writer’s Guide, there’s an invoice template included. If you’re looking for freebies, check out the Microsoft Office website or create your own. Regardless of your method, make sure your invoice conveys the professionalism you want your clients to perceive. That means no clipart!

How to Send an Invoice

Send your invoice the same way you send your work. If your final project is sent via postal mail, send your invoice the same way, unless you’ve made some other arrangement with your client. Send invoices as soon as possible after the project has been completed.

I most often prepare invoices as soon as the project is finished and send them in a separate email directly after I deliver the goods. I send far fewer reminders that way. Include the word “Invoice” in the subject line of the email and maybe even a summary in the body of the email. For example, “The invoice for $500 is attached. Please pay by January 11, 2011.”

Follow Up

I print invoices, put them in a folder, and mark them as Paid once payment comes through. If a client pays me without being invoiced, I print the transaction information from Paypal and file it with the rest of the Paid invoices. That way, I have all payment receipts in one place.

Invoicing is an extra step, but it’s a necessary one. Some of your clients need invoices to get the tax write off for the work you’re doing. You need invoices to help track payments and total your income.

“The check’s in the mail.”

This is the client who claims they’ve already paid you, but for some reason the payment never seems to arrive when it’s supposed to. You try to talk your client into using Paypal to send payments, but for some reason, they’re in favor of old-fashioned paychecks. Do you suffer through this prehistoric way of being paid or move on to clients who can pay you faster? (Note: if you accept checks from clients, it’s a good idea to require prepayment and make sure the check clears before you send the work).

“It’s our payment issuer’s fault.”

With this client, payments are never on time and it’s never the client’s fault. There’s something wrong with Paypal, or the wire transfer, or the bank, or the person who’s supposed to pay them. You might make an exception the first couple of times because you realize you need an exception sometimes. But after a few times of hearing the excuses, you realize it’s bull. Since payments eventually do arrive, you wonder if you should continue accepting these excuses or move on to better paying clients.

“The haggler”

Some clients and prospective clients will try to convince you to lower your rates. This wouldn’t be a huge problem if they rates these clients really wanted to pay weren’t akin to slave wages. Honestly, this is my least favorite client of all, if I can call them clients at all. Hagglers usually end up not hiring me because I won’t go low enough on my rates. Hagglers fail to realize that negotiations are only successful when the result is a win for both parties – giving a client a lower rate is seldom a win for the writer.

“Disappearing acts”

Hopefully you never have to deal with this client, but you need to know he exists. This is the client who doesn’t pay your for your work at all. They don’t give an excuse. They simply disappear after you send the articles. This client is the reason a lot of writers charge upfront. I’ve had this happen only a couple of times and once with a client who paid a 50% deposit upfront.

“Always on time.”

This is the client we wish all clients could be. This client’s payments are like clockwork – they show up in your Paypal account almost as soon as you click “Send” on the invoice. It’s too bad all clients don’t pay this way.

Develop a Payment Policy

You can eliminate many payment issues by coming up with a payment policy. In general, I require 50% deposit on projects payable via Paypal before I start work on a project. The remaining 50% is due within 5 business days after the articles are received. I may split the payments in thirds or quarters for larger projects.

I’ve heard of writers who require the remaining deposit before they actually send the completed articles. I’ve also heard of those who require 100% deposit upfront.

Payment policies usually work with clients who don’t work with a lot of freelancers. On the other hand, some clients have a set payment schedule for freelancers and contract workers and pay you when they pay everyone else.

If you don’t already have a payment policy, now is a good time to come up with one. Post it on your website and send it to new clients when they ask for a quote or submit a new order. It won’t eliminate all payment problems, but you’ll definitely have fewer problems with payments when you set some rules.

Which types of client payments and payment issues have you had to deal with?

There are downsides of working with middlemen clients too though. I’ve been thinking about them a lot lately as I consider whether or not to replace a specific contract or two. If you’re considering taking on middlemen clients, here are some of the not-so-hot aspects of those relationships that you might want to consider.

1. It can be an all or nothing deal. – After finishing a current project, I’ve already decided I won’t offer a specific service through any middlemen clients anymore. But while I can choose to offer some services and not others, I cannot say “I’ll work for all of your clients except for so-and-so.” Well, I could, but chances are that I’d lose the contract as a whole and they’d go with someone willing to take on all of their clients together. When you work with a client directly, you can “fire” them if they become overbearing, are the never-pleased type, or if they’re simply really difficult to work with. With middlemen clients you can’t do that. You can’t cut off ties with one of them. You have to take things through your direct client, and if you bail you put their business at risk. You don’t want to cost your client clients of their own.
2. Your policies might have to adapt. — When I work with end clients directly, I very rarely accept phone calls. While my rates might look high to some buyers who are used to working with extremely low rate content writers, they’re actually very low compared to people with similar credentials (especially when it comes to things like PR and marketing copy). I’m able to do that and still keep my hourly rates where I want them by streamlining my process. That means being able to deal with client communication in dedicated blocks of time via email. When I have an end client who insists of regular phone conversations, they’re billed a $125 per hour consulting rate with a minimum half hour billed for each call. (It’s amazing how they often realize those calls are unnecessary and a 5-minute email will suffice when they see the time they’re taking out of my day in the form of a bill.) With middlemen clients, there isn’t as much freedom in billing out things like this or “inconvenience charges” where you might charge more to a client you know is regularly a pain to work with. The middleman client has a rate they’ve negotiated with their clients and that includes the fees you’ve settled on with them previously. You would have to go through two levels of clients to get other charges approved and paid.
3. You might have to walk on egg shells. — Let’s go back to the issue of losing one client meaning you could lose all of those end clients through the middle man firm. While not being able to fire a client is a tough situation to be in sometimes, so is knowing that you have to be extra careful not to piss off any of those end clients. The clients who find me directly know I’m blunt. They come to me for that fact. But sometimes their own clients don’t have the stomach for it. They don’t want to hear a professional opinion that disagrees with their own. If you speak up, you risk them getting pissed and canceling their contract with the firm. Then you risk the firm canceling their contract with you because you cost them a client. Personally I find myself keeping my mouth shut more than I should when working with end clients through a middle man, and that’s not why I went into business for myself.
4. Payments for several clients can be lumped as one. – This can be either a blessing or a curse really. If a middleman client pays on time all of the time, then you’ll receive payment for several projects in a timely manner — no chasing down invoice after invoice with end clients. However, if one of your middleman clients starts paying invoices late on a regular basis, you’re getting late payments not for one client’s work, but for several clients’ projects. You take this risk with any client. With middlemen clients it might just be a slightly bigger risk.

Things will be better with some middlemen clients than others. Some will try to micromanage everything you do. Some will leave you pretty much free to handle your side of things. Some will let you work directly with the end clients. Some will require that everything go through them (meaning you never hear the end client’s actual thoughts on a project). Middlemen clients can be one of the best things to happen to a freelance writer. Then again, sometimes they’ll prove to be an excrutiating headache. In the end, it comes down to remembering that they’re still a client. You can still fire a firm as a client.

You just have to be prepared to fill that contract time with something else. You can still be open and up front with a middleman client. You just have to be prepared for the consequences if doing so costs them contracts of their own. It can be a difficult path to navigate. How do you do it?

Instead, I’m going to give you some easy-to-follow tips on managing your records throughout the month so it takes less work to figure out how much money you’ve made.

Keep track of your invoices. If you’re not invoicing your clients, start now. An invoice is just a bill that says “you owe me this much money by this date for this work.” It’s sort of like what the plumber sends after fixing your leaky pipes.

Don’t have an invoice template to use?

1. Jenn includes an invoice template in her Web Writer’s Guide workbook.
2. You can find invoice templates online by doing a search for “invoice templates.”
3. There is software specifically designed for invoicing. For example, I use MacFreelance.
4. Use Paypal’s invoice tool.
5. Create your own invoice template in Microsoft Word. (Tip: save as .dot file.)

Prepare and send your invoices soon after your project is complete, or before the project is done if you require advance payment. Make sure your clients get their invoices and make sure you keep a copy for your records. I keep both electronic and hard copies for added security. (You never know when your computer might crash or your house burns down and hopefully they don’t both happen at the same time).

Follow up on unpaid invoices. Get a file folder and label it “2009 Invoices.” (You need a new folder every year.) As you receive payments from clients, mark your invoices as “Paid” and file them away. Periodically review your invoices and follow up on those that remain unpaid.

Track your expenses. When you shop for your business items, like office supplies, shop only for business. Save your personal shopping for another trip and expense tracking will be much easier. Keep receipts for all your purchases, even if you have to print them from online.

I put all my receipts in an envelope until the end of the month when I total them up. After that, I file them away based on their tax categories, e.g. Advertising, Travel, Food, etc. (See About.com Tax Planning for a list of tax-deductible business expenses.)

Add up your net income each month. Earlier, I talked about all those useless spreadsheets you might have learned about in your college Accounting class. I still use a spreadsheet, it’s just far more simple than anything I’ve ever learned about in school. My spreadsheet has 4 rows, 13 columns, and looks similar to this:

It’s such a simple chart, you could just draw it out on a piece of Notebook paper. (But then, you wouldn’t be able to put in a formula to calculate your Net Income.)

At the end of each month, I add up all my paid invoices and all the expenses I’ve paid. Then, I subtract expenses from income to get my net income – that’s how much money I made that month. I try to generate income two months in advance of spending it. For example, what I make in October is what I pay myself in December. It gives me peace of mind knowing the bills are covered for the current and next month.

Writer You Are, Accountant You May Not Be

Of course, DIY accounting is not for everyone. Some of us need accountants and there’s nothing wrong with that. Make sure you get someone who has experience working with self-employed individuals and that it’s someone you can afford. Ask for referrals from friends and family members. When you find someone you like, get a few references to see how satisfied their other clients are.

Making the System Work for You

Doing your own accounting and bookkeeping can be time consuming, especially in the beginning as you’re working out a system. Once you pass that hump, you should be able to cut down your accounting time to 4-8 hours a month. Filing things away during the month makes the process a lot easier than having to spend an entire day looking for receipts and invoices only to spend another day sorting and adding them.

As your business grows, continually evaluate whether it makes sense to continue doing your own accounting or if it’s time to get some outside help.

Are you your own accountant? What are your accounting and bookkeeping practices like?