Money Strategy #3: Invoice RegularlyNovember 20, 2008
This article is part of a series of eleven short articles on managing money. It is aimed at freelancers and independent contractors. Before you read this article, make sure you have read the disclaimers etc. in the introductory article about my money management rules.
Strategy #3: Invoice regularly
Regularly invoicing your clients makes you look professional and will keep your cash flow under control (remember Rule #2: Positive cash flow is king!).
Make sure your payment terms and billing methods (see Strategy #9) are known and agreed to in writing by your client before you start work (you do have a contract, don’t you?). Will you invoice weekly, fortnightly, or monthly? Your invoicing cycle may depend on your contract. For ad hoc ongoing contracts, I’ll invoice monthly. For regular ongoing contracts, I’ll invoice more often. For ad hoc, one-off clients with whom I don’t have a prior relationship, I ask for at least 50% of the estimate up front (sometimes the full amount) and the remainder on completion.
Sometimes the payment cycle is out of your control. This can happen with large corporate or government clients, so find out who the person is in Accounts Payable who looks after payments and keep in touch with them. Ultimately, they are the ones who pay your invoice.
Also chase up outstanding invoices with the person who you send it to—it may be on their desk. Always keep copies in case your invoice ‘gets lost’.
One thing I can guarantee is that you will happily accept more work from those who pay you on time.
Mad about Harry
Let me tell you a story about Harry.
Harry engaged me to do a piece of work based on a recommendation from a colleague. I did the work and invoiced Harry.
Within TWO DAYS of me mailing the invoice, Harry had paid me. I was so gobsmacked I called him to thank him. He told me something that’s stuck with me ever since. He said that paying immediately was his way of not only saying thanks and showing respect for my work (Harry’s big on respect), but also a way of ensuring that I would think favorably of him when he wanted me to do more work for him further down the track.
You know what? It worked!
I have never refused any work from Harry, even if I’ve been committed to other projects. I will always fit him in. And I never refuse a quick “Hi, how are you?” chat with Harry either.
He has a special place in my list of people I will work for in a heartbeat. And all because he paid promptly. (He’s a nice guy too, but paying promptly made him even nicer in my eyes.)
Update 26 November 2008: OK, I now have a client who is faster than Harry. I emailed my invoice to J at 4:52PM today and got an email from him at 5:02PM telling me he just paid it electronically. That’s fast! Sorry, Harry—you now have a rival!
Update 20 December 2012: ‘J’ mentioned above has been a regular ad hoc client of mine. He ALWAYS pays promptly. But today he surpassed his previous record — I emailed him my invoice and he sent me back an email 8 minutes later to tell me it had been paid. Now that’s a client I want to keep ;-)
- The Rules
- Strategy #1: Get professional advice
- Strategy #2: Keep your money separate
- Strategy #3: Invoice regularly (this article)
- Strategy #4: Pay your bills on time
- Strategy #5: Pay yourself
- Strategy #6: Set aside your tax obligations
- Strategy #7: Use accounting software of some sort
- Strategy #8: Regularly keep track of your position
- Strategy #9: Decide on a billing method
- Strategy #10: Manage any surplus funds