Knowing how to write an invoice is an essential business skill. As a small business owner, you probably wear every hat in your business. You do sales, marketing, customer service and collect payments from clients.
With so many responsibilities, it’s easy to feel overwhelmed and lose focus. That’s not all – invoicing isn’t exactly fun for most people. However, it is a critical skill because it leads to getting paid.
Fortunately, you’re just a few minutes away from learning how to invoice. We’ve put together everything you need to know about how to write an invoice
Here’s everything you need to know about writing an invoice:
- What is an invoice, and when is it required?
- Checklist for writing an invoice
- What to include in a digital invoice
- Frequently asked questions on writing an invoice
- Save time with a free invoice tool
1. What is an invoice, and when is it required?
An invoice is a document a business sends a customer to collect payment. An invoice typically includes a variety of information, including a description, an invoice number, an invoice number, payment instructions and other details.
Whether you run a consulting, agency or freelance business, you must know how to create and issue invoices. Invoices are critically important because few clients will be willing to pay you any money unless they receive a valid invoice. As your business grows, you’ll start to send more and more invoices to clients.
Depending on how you set up your business and contracts, there are a variety of times when you may decide to send an invoice. Here are some of the most common situations when sending an invoice is needed:
1.1. Upfront project invoice
In many businesses, it is common practice to send an upfront invoice. For example, a consultant may send clients a $4,000 invoice upfront to get projects started. An upfront invoice is helpful because it improves your cash flow as a small business. In addition, sending an invoice at the start of the relationship means your client can easily learn how to pay invoices with your preferred method like CheckYa.
1.2. Project milestone invoice
Sometimes, you may be providing a service or delivering a project to a client that may take weeks or months to complete. For example, let’s say you are delivering a six-month search engine optimization (SEO) project. Waiting six months to get paid isn’t that appealing! Therefore, the client agreement may state that you will issue invoices as certain milestones are completed (e.g. milestone 1: completed SEO analysis, milestone 2: content strategy completed etc.).
1.3. Project completion invoice
A project completion invoice is one of the most popular types of invoice. With this type of invoice, you are sending a bill to the client when all of the work is completed. With a small project – like a paid consulting call – you may only send a single invoice after the service is delivered. For larger projects, it is often wise to design your contract so that you get paid gradually over time.
1.4. Extraordinary expenses invoice
Sometimes in business, problems arise, and you may incur unexpected expenses. For instance, a software consultant may purchase more software to secure a client’s website completely. If the purchased software is solely for the client’s benefit, sending an invoice to cover these costs is reasonable. If you are unfamiliar with issuing invoices for costs, discussing this topic with your client is best. Don’t be shy, though! Many larger companies are used to paying a wide variety of expenses for the consultants they work with. If you are solving major problems for the client or providing significant value, sending the occasional invoice for unusual invoices is unlikely to be a problem.
It’s not strictly necessary to send a separate invoice for expenses. Another option is adding a line item to your digital invoice for expenses. For example, line item 1 in the invoice might state “SEO consulting – $5,000,” and line item 2 on the invoice may state “SEO software expense – $500.” If you send an expense invoice, make sure to have receipts, invoices, and other documentation explaining why the expense was incurred.
1.5. Late payment invoice
Let’s hope that you never need to send this type of invoice! Alas, sometimes your clients may be disorganized and fail to pay you on time. Before demanding a late payment fee, do what you can to work with the client. It is usually wise to send at least one or two payment reminders before sending a late payment invoice. If you decide it is necessary to send an invoice, see our full guide to sending a late payment invoice: How To Charge Late Fees On An Invoice And Get Paid Faster.
2. Checklist for writing an invoice
Sending your first invoice to a client may feel scary if you are unfamiliar with the process. Alternatively, sending invoices may feel painfully time-consuming if you don’t have a solid process to follow. This step-by-step checklist will give you everything you need to issue valid, professional invoices to clients.
2.1 Is Now The Right Time To Send An Invoice?
Sending an invoice at the wrong time can instantly upset a client! That’s why it is essential to consider timing. Usually, your client agreement should provide answers. For example, the agreement may state that you will issue two invoices: an upfront invoice and a project completion invoice. In that case, you can only send an invoice if one of those two conditions applies.
2.2 How Much Money Should Your Invoice Charge?
Getting your pricing and money details correct on the invoice is critically important. Double and triple-check the prices to avoid common mistakes like adding an extra zero to the invoice.
What if you’re dissatisfied with how much money you’re charging? See our guide for details on How To Raise Your Freelance Rates: 4 Email Templates To Earn More.
2.3 Does Your Invoice Have An Invoice Number?
Each invoice you send out should have a unique invoice number. An invoice number makes it simple and easy to review a list of your invoices. In addition, an invoice number makes your communication with clients easier. To find out more about how to use invoice numbers, see our post: Invoice Number: An Easy Way To Keep Your Business Organized!
There are two important points to keep in mind about using an invoice number. First, each invoice should have a distinct number – reusing invoice numbers can be confusing. Second, pick an invoice numbering practice and stay consistent with it (e.g. start with the invoice number and increase it by 10).
2.4. Does Your Invoice Align With Your Contract or Agreement?
A valid invoice should also align with the expectations you have set in your client agreement. For example, your contract may state that your standard pricing is $150 per hour for the first 10 hours of the month and then $125 per hour for additional hours after that. In that case, your invoice might have two different line items:
- Line Item 1: 10 hours of consulting at $150 per hour: $1500
- Line item 2: 5 hours of consulting at $125 per hour: $625
- Sub-Total: $2,125
In addition, check if your contract has maximum amounts or other limitations. For example, some larger companies may have an annual maximum (e.g. $10,000 per month or $120,000 per year). If your contracts have these limits, review your invoices and invoice history to ensure your invoices align with the contract.
2.5. Does The Invoice Have Descriptive Line Items?
Picture this… You own a home and hire a contractor to upgrade your kitchen. The contractor quotes a $20,000 price. After a stunned silence, you agree, and the contractor starts work. As the month ends, you receive an invoice for $24,000 with no meaningful details. You’re upset because the final invoice is far more than you imagined.
Now, put yourself in the shoes of the contractor. How could they avoid upsetting a client? Ongoing communication during the project is the first step. Most people understand that unexpected problems come up in life. When these problems occur, it is important to promptly assess them and communicate your proposed solutions to the client. In addition to proactive communication, adding descriptive line items to the invoice can reassure the client.
Rather than sending a generic-looking invoice with $24,000, it might be wiser for the contractor to add multiple invoice lines such as the following:
- Kitchen Materials: $10,000
- Labor Costs: $10,000
- Additional Plumbing Repairs: $4,000
By adding several line items, the client can better understand why the total invoice amount is higher than the estimate.
2.6. How Does This Invoice Compare To Previous Invoices? (optional)
This step is optional and applies to business owners with ongoing client relationships. In this situation, the invoice amounts may change from month to month. Before issuing an invoice to a client with whom you have an ongoing relationship, look at your invoice trend. Let`s illustrate this best practice with an example.
You run a consulting business focused on helping clients grow their Instagram following. Your contract includes some flexibility in pricing. The baseline fee is $4,000 per month. Also, you can earn a bonus depending on the client`s Instagram follower growth. The first month`s invoice might be $4,000. However, the third month might be $5,000 or much more. At first glance, your client might be surprised to see an increase on their invoice. If you see a significant (i.e. 10% or more) increase in your invoice amount, you may want to reach out to your client to explain the change.
2.7. Does the Invoice Have An Invoice Date?
Each invoice that you send out should have an invoice date. To save you time, CheckYa automatically adds an invoice date. Including this date on your invoice is important because it may influence how your client manages the invoice payment process.
2.8. Does the Invoice Number Have the Correct Client Information?
Do you work with larger businesses with 50, 100 or even more employees? In that case, you may interact with multiple people. For instance, a cybersecurity consultant might interact mostly with the IT director. However, the IT director may not be involved in reviewing and approving invoices. Instead, the company may have a policy that vendors must send their invoice to a specific person (e.g. Jane Smith) in the accounts payable department. Sending the invoice to the wrong person can lead to payment delays.
To minimize this type of problem, ask your client upfront on who you should send invoices to. If possible, get full contact information (company mailing address, contact name, contact phone number and contact email address).
2.9. Is The Invoice Clear On Payment Terms?
Review the invoice to make sure that your payment expectations are clear. For example, if you expect payment in 30 days and want clients to pay you with CheckYa, reinforce this expectation on your invoice. You can use the notes field to provide this information.
2.10. Have You Proofread The Invoice For Accuracy?
Sending an invoice with typos, missing details or incorrect information is embarrassing! To minimize the chance of this happening to you, take a break after you create the invoice and before you send it. After 5 minutes, come back to the invoice and review the invoice for accuracy.
3. What to include in a digital invoice?
Your digital invoice should include the following:
- Your Name or Your Company Name
- Client Name
- Client Contact Details
- Invoice Line Items: Use multiple line items if you have a more complex invoice.
- Cost breakdown: Information about the hours or quantity of service delivered.
- Tax Amounts: If you need to collect taxes (e.g. sales taxes), double check these amounts.
- Payment Instructions: Clearly state how you want the client to pay your invoice.
The whole process is streamlined when you use CheckYa to create and send digital invoices.
4. Frequently asked questions on writing an invoice
4.1. My client has an invoice template they want me to use, but I want to use CheckYa. How do I address this situation?
Larger companies often have more exacting standards for invoices and payments. Take a few minutes to carefully read the template provided by your client. In many cases, you can copy and paste the key details (e.g. client contact details, payment instructions) into CheckYa. Suggest to your client that you will copy and paste all the key details into your digital invoice. Usually, this suggestion will be accepted.
4.2. How much description should I use for invoice line items?
Typically, an invoice line item has just a few words of description. At most, a short sentence should suffice. For example, look at the contractor example earlier in this guide – there are three different line items. If you feel that the client may have additional questions about your invoice, you may want to send additional details to the client in an email.
5. Save time with a free invoicing tool
Creating invoices from scratch is not efficient. Instead, use CheckYa to send digital invoices to your clients and receive payments.
You can save up to 100% of your payment processing fee when invoicing via CheckYa. And CheckYa makes it easy to track all your invoices payments at one place – you’ll never have to worry about forgetting an invoice again!
Not just that, CheckYa let’s you send automated reminders upon due payments, so you’ll never have to chase down late-paying clients!
