Now that you already know how to get into consulting, the next thing you need to know is how to bill your clients.
Tracking your hours and creating invoices that detail your services is crucial to running a successful freelance consulting business. Consultants must record their hours and invoice clients for their work regularly.
Have you recently established your own consulting business? Billing for consulting services for the first time can be challenging. Where do you start? How do you create an invoice that guarantees you'll get paid on time?
In this article, we'll explain everything you need to know about how to bill clients for consulting services. Let's get stuck in!
Below we've outlined six simple steps consultants can follow to effectively bill clients for their services.
If you're a professional freelance consultant, you probably charge by the hour. Hourly billing is a common arrangement many consultants come to with their clients. Before you even begin to create an invoice, you'll need to have a robust time-tracking system in place.
Implementing an organized system for tracking the number of hours worked streamlines the invoice creation process. You can break down the fees into smaller totals alongside your hourly rate instead of just adding a grand total at the end. This makes it easier for invoice recipients to see what service they're paying you for and the hours you've worked to provide it.
Come up with a system that works for you. You can track your hours with a simple document in Excel or Google Sheets. Or you may want to use an all-in-one time-tracking software like Bonsai that allows you to manage your hours with timesheets and integrations with your billing system. Whatever solution you chose, ensure that it's one you can stick to. This way, you can make sure you're not missing out on potential earnings.
Along with the word "Invoice" somewhere on the page, every bill should include appropriate information about your business. This allows the client to immediately understand who they need to pay.
Make sure to include:
Bonsai's unified invoicing software offers invoice templates that save your business details and contact information. This means you don't have to input the same information over and over again before you send each invoice. This is a huge time-saver and establishes consistency in your invoicing method.
Next up, you'll need to add information about who you're providing consulting services to. If you work with the same client regularly, you'll benefit from saving this information using an invoice template. This way, you don't have to undergo the repetitive task of filling in the details about clients each time.
So what information about your client should you include on a consulting invoice?
Include the client's name and billing address. This is essential for record-keeping and accountability purposes. This way, you know who has or hasn't paid up and can follow up accordingly. It's also important to add the invoice date along with this information, so the client knows exactly when the invoice was received and can make the payment according to the payment terms set out.
This is a crucial detail when it comes to creating professional consulting invoices—or any other type of invoice for that matter!
Each invoice you create must have a unique invoice number. Establish a method for numbering your invoices. Number them sequentially, or based on the project or client. Invoicing software automatically generates invoice numbers based on the last invoice created for a specific client, so you don't have to think about it!
Numbering each invoice makes it easier for you and your clients to track and manage invoices sent and received. The invoice number makes it much easier when you need to search for a specific invoice and helps you to remain organized. This way, you can track late payments and hold clients accountable for the bill you've sent.
Moreover, as a freelance consultant, you'll appreciate your own organization when it comes to filing self-employment taxes at the end of the year.
The next step when it comes to billing for consulting services is to list your services. Make sure the way you do this is clear and organized, so the client can understand exactly what they're paying you for and —more importantly— pay you the correct amount.
To do this, create an itemized list of the services you've provided for the client. This list should include:
If you're just starting as a freelance consultant, you might be asking yourself "How much should I charge for my consulting services?". Don't worry, you're not alone! The rate for consulting services varies depending on the industry, the nature of the consulting services, and the personal experience of the consultant.
If you've recently established your own consulting business, the best method to figure out your hourly rate is to divide your previous consultant salary by 52 work weeks, and then divide that by the number of work hours in a week (40). This will reveal how much you were making per hour before, so you can bill clients at the same rate or adjust it accordingly depending on the service you want to provide.
Remember that how much you charge is a reflection of value. Low consultant pricing rates don't translate to much value, and so don't necessarily lead to more work. Instead, ensure your pricing per hour or project reflects your experience and the value you can bring for clients.
Finally, before you send your invoice you'll need to outline your payment terms on the bill.
This section of your bill establishes the payment methods you accept, the due date, and any late fees that will be applied in the case of late payments. List your late fee so clients are accountable for any applicable fees in case they miss a payment deadline.
When it comes to determining your payment due date, it's up to you. Some consultants choose to bill for payments to be made immediately (due upon receipt), whereas others might set different terms for the due date—within 30 days, for instance.
Now you know how to bill clients for consulting services, we thought we'd share some insider tips on how to streamline your business operations, create better workflows, and get paid on time.
Think about it—the more often your clients pay you, the better your cash flow. Those working in consulting often choose to get paid at the end of each month. This is standard, especially when it comes to consulting with hourly rates and charging for expenses. However, you may want to bill more often than that—say, every week or as soon as a project is completed.
This is going to make your life much easier. Send your invoices as soon as you complete the work. Not only does this ensure you get paid as soon as possible, but it also means you're less likely to make mistakes when billing for your services. When the project is fresh in your mind, you'll remember exactly what you did and how much time you spent on specific tasks.
Just like you can charge customers a fee for paying invoices late, you might want to give them a reason to pay you promptly. Offer a small discount (something in the range of 0.5%-1% will suffice) as an incentive. This benefits both parties! They get a discount, and you don't have to apply late fees or spend weeks waiting for your payment.
In today's digital world, why would you just accept a single payment method? It's more convenient for a client when consultants accept a variety of payment methods. Instead of just accepting bank transfers, why not set up an online payment service like PayPal? The more options you give your client, the more likely they are to make the payment on time without asking questions.
For long term projects that require a significant amount of your time, you may decide to ask for an up-front deposit. By doing this, you can secure your business and ensure you receive at least partial payment for the work you do. You could ask for 25%-50% of your payment rate upfront. By doing so, you'll reduce the risk associated with accepting long-term projects from clients you haven't yet grown to trust.
Sometimes you might work with disorganized clients. Unfortunately, there's no guarantee that your clients will pay on time. When this doesn't happen, you may need to get in contact to see what's going on. When this is the case, stay professional and don't lose your cool because they haven't paid you. Remember, if you've created and signed a legally binding contract for your services, you have the right to take the matter to court if it comes down to it. You'll want to phrase your questions politely, rather than take an accusatory tone. You can also contact clients personally with a payment reminder email or a phone call if they're not showing signs of paying you anytime soon.
When you send your invoice, be sure to include a short thank you note. It might be trivial, but using manners can make a difference when it comes to getting paid on time and help you retain your clientele base.
We left the top tip for last. Ensure your consulting business operations run as smoothly as possible by using invoicing software. There are plenty of free invoicing software options on the market. One such cloud-based invoicing software is Bonsai.
Bonsai automates the invoicing process, allowing you to create, send, and track invoices sent from a unified platform. What's more, Bonsai offers free invoice templates to help freelancers create professional invoices. That's not all though. Bonsai is a unified tool for freelancers. With Bonsai, you can manage and automate all of your business processes. From writing proposals to tracking every hour you work to managing your business accounting needs—Bonsai does it all.
This kind of software can help to take the stress out of freelancing or managing a small business by taking care of all the administrative tasks. This means you can spend more time doing what you do best, whether it's consulting, freelance writing, or something else.
Ready to bill your first client for consulting services? Sign up for Bonsai today and download our free consultant invoice template. All you need to do is:
1) Fill out the template with your contact details, project rates, and payment terms.
2) Send your invoice.
3) Keep track of whether or not the client has opened and paid the invoice.
All without leaving Bonsai's ultimate unified software platform. What are you waiting for? Start free with Bonsai today.
A verbal contract (formally called an oral contract) refers to an agreement between two parties that's made —you guessed it— verbally.
Formal contracts, like those between an employee and an employer, are typically written down. However, some professional transactions take place based on verbally agreed terms.
Freelancers are a good example of this. Often, freelancers will take on projects having agreed on the terms and payment via the phone, or an email. Unfortunately, sometimes clients don't pull through on their agreements, and hardworking freelancers can find themselves out of pocket and wondering whether a legal battle is worth all the hassle.
The main differences between written and oral contracts are that the former is signed and documented, whereas the latter is solely attributed to verbal communication.
Verbal contracts are a bit of a gray area for most people unfamiliar with contract law —which is most of us, right?— due to the fact that there's no physical evidence to support the claims made by the implemented parties.
For any contract (written or verbal) to be binding, there are four major elements which need to be in place. The crucial elements of a contract are as follows:
Therefore, an oral agreement has legal validity if all of these elements are present. However, verbal contracts can be difficult to enforce in a court of law. In the next section, we take a look at how oral agreements hold up in court.
Most business professionals are wary of entering into contracts orally because they can difficult to enforce in the face of the law.
If an oral contract is brought in front of a court of law, there is increased risk of one party (or both!) lying about the initial terms of the agreement. This is problematic for the court, as there's no unbiased way to conclude the case; often, this will result in the case being disregarded. Moreover, it can be difficult to outline contract defects if it's not in writing.
That being said, there are plenty of situations where enforceable contracts do not need to be written or spoken, they're simply implied. For instance, when you buy milk from a store, you give something in exchange for something else and enter into an implied contract, in this case - money is exchanged for goods.
There are some types of contracts which must be in writing.
The Statute of Frauds is a legal statute which states that certain kinds of contracts must be executed in writing and signed by the parties involved. The Statute of Frauds has been adopted in almost all U.S states, and requires a written contract for the following purposes:
Typically, a court of law won't enforce an oral agreement in any of these circumstances under the statute. Instead, a written document is required to make the contract enforceable.
Contract law is generally doesn't favor contracts agreed upon verbally. A verbal agreement is difficult to prove, and can be used by those intent on committing fraud. For that reason, it's always best to put any agreements in writing and ensure all parties have fully understood and consented to signing.
Verbal agreements can be proven with actions in the absence of physical documentation. Any oral promise to provide the sale of goods or perform a service that you agreed to counts as a valid contract. So, when facing a court of law, what evidence can you provide to enforce a verbal agreement?
Unfortunately, without solid proof, it may be difficult to convince a court of the legality of an oral contract. Without witnesses to testify to the oral agreement taking place or other forms of evidence, oral contracts won't stand up in court. Instead, it becomes a matter of "he-said-she-said" - which legal professionals definitely don't have time for!
If you were to enter into a verbal contract, it's recommended to follow up with an email or a letter confirming the offer, the terms of the agreement , and payment conditions. The more you can document the elements of a contract, the better your chances of legally enforcing a oral contract.
Another option is to make a recording of the conversation where the agreement is verbalized. This can be used to support your claims in the absence of a written agreement. However, it's always best to gain the permission of the other involved parties before hitting record.
Fundamentally, most verbal agreements are legally valid as long as they meet all the requirements for a contract. However, if you were to go to court over one party not fulfilling the terms of the contract, proving that the interaction took place can be extremely taxing.
So, ultimately, the question is: written or verbal agreements?
Any good lawyer, contract law firm, or legal professional would advise you to make sure you formalize any professional agreement with a written agreement. Written contracts provide a secure testament to the conditions that were agreed and signed by the two parties involved. If it comes to it, a physical contract is much easier to eviden in legal circumstances.
Freelancers, in particular, should be aware of the extra security that digital contracts may provide. Many people choose to stick to executing contracts verbally because they're not sure how to write a contract, or they think writing out the contract terms is too complicated or requires expensive legal advice. However, this is no longer the case.
Today, we have a world of resources available at our fingertips. The internet is a treasure trove of invaluable information, platforms, and software that simplifies our lives. Creating, signing, and sending contracts has never been easier. What's more, you don't have to rely on a hiring a lawyer to explain all that legal jargon anymore.
There are plenty of tools available online for freelancers to use for guidance when drafting digital contracts. Tools like Bonsai provide a range of customizable, vetted contract templates for all kinds of freelance professionals. No matter what industry you're operating in, Bonsai has a professional template to offer.
A written contract makes the agreement much easier to prove the terms of the agreement in case something were to go awry. The two parties involved can rest assured that they're legal rights are protected, and the terms of the contract are sufficiently documented. Plus, it provides both parties with peace of mind to focus on the tasks at hand.
Bonsai's product suite for freelancers allows users to make contracts from scratch, or using professional templates, and sign them using an online signature maker.
With Bonsai, you can streamline and automate all of the boring back-office tasks that come with being a freelancer. From creating proposals that clients can't say no to, to sealing the deal with a professional contract - Bonsai will revolutionize the way you do business as a freelancer.
Why not secure your business today and sign up for a free trial?