An invoice is a document containing payment details that obligates a client to process your fees for your services. It’s a formal way of asking your clients to complete the payments within the specified deadline.
While invoicing might overwhelm many freelancers and small business owners, free invoice templates offer a quick fix for your worries.
An invoice template works as a pre-made outline you can adapt depending on the project; without going through the trouble of starting from scratch. Simply make a copy of the template, enter all the information, download the document, and send it through—job done.
Here are some great reasons:
What is an invoice used for? An invoice is much more than a document that tells the client it's time to be paid. It’s true that it establishes an obligation on the part of the client to pay you for services; it’s a verification of the agreement that you have reached when bidding on the work or agreeing to a contract.
It also creates what’s called an account receivable, which is part of the bookkeeping and accounting of your business. It establishes a record of work completed and payments rendered. It’s important as part of running your business, especially at tax time. If you're self-employed, you can take advantage of self employment tax deductions to lower your taxable income and increase your profits.
It notifies the customer that it’s time to make payment, and it also notifies them what happens if they don’t pay. After all, you can include notification of a late fee, which can be a flat rate or a percentage of the project cost. If payment isn’t received, a follow-up invoice will include the late fee as part of the total cost.
You can’t assume that the customer will pay you without sending an invoice. And you certainly can’t expect to receive a late fee without clearly stating that there will be an additional charge for delayed payment.
It’s true that using an invoice template can speed up your invoicing process and help ensure you have quality invoices every time you send one to a client.
However, there are still some pitfalls that are important to avoid when using an invoice template. By knowing what they are, you can modify your template to ensure you aren’t making these mistakes, and repeating them each time you create an invoice.
At Bonsai, we’ve worked with 500,000+ freelancers and most of them are in the top 1% category in terms of earnings. We asked them what their top mistakes were and how they would avoid it. Give our invoice templates a try today.
We’ve baked in a lot of the best practices mentioned in these tips in our own agreements tool called Bonsai. It costs $19 per month and is used by 500,000 freelancers. Give it a try with a 14 day free trial.
An invoice template can be a game changer for users at multiple career levels. If you’re a rookie, a template will teach you how it’s done. If you’re a seasoned professional, it’ll save you the time and effort of creating invoices from scratch.
Now, if you’re wondering what’s included in professional invoices, here’s a helpful list:
These are the standard elements included in invoice templates. You can customize this list and make your template more extensive as per your preference.
Having a section in your templates for late fees can be a touchy subject for some freelancers. After all, it seems a little “heavy handed” to charge clients who don’t pay promptly. You likely want to work with those clients again, so you may wonder, will late payment terms turn off a client?
In reality, you’re running a business too, so any valuable client should understand and appreciate late payment terms. They should understand that you need cash flow too, so those terms should encourage them to make payment promptly.
As freelancer blogger, author and public speaker Linsey Knerl says:
“When you’re a freelancer, time is money, so it’s important to acknowledge the impact late payments can have on your business. There’s no benefit in assuming that things will always go your way. In fact, it’s best to confront the possibility head on.”
But there are other reasons to add late fees to invoices. It establishes you as a professional, running a business. It actually provides you with compensation if the client is late, since your cash flow is affected by non-payment. In fact, there’s a good chance your client uses late fees.
Also, it takes away any negotiation if payment is overdue. You don’t have to follow up and try to figure out an amount to charge the client. It’s clearly stated from the outset, on every invoice, that you have an established late fee.
But there are some important considerations to adding late fees to an invoice.
First off, be sure it’s clearly stated in the same format as all the other items and payment terms on your invoice. Don’t hide the late fee terms in fine print.
In fact, it helps to include late fees in the terms of the original contract. That removes any surprise when the client gets your invoice. For instance, Bonsai contracts and invoices already include this type of language.
Second, be sure you actually completed the work to the satisfaction of the client. If you send an invoice for unfinished work, or for work that the client still wants to discuss with you, having a late fee may only aggravate the relationship.
And remember, you can always waive the fee if there are extenuating circumstances, like a client who happened to be on vacation when the invoice was sent.
It’s still better to have the terms stated and waive them, than to try and add a fee without the client expecting it.
The next decision you have, then, is how much to charge and when to enact the late fee.
When determining the amount, don’t make it unreasonable. There may be laws in your jurisdiction regarding the amount you can charge, but in any event, you want the late fee to be an incentive and not a punishment.
A fair amount is 5% of the total of the invoice. If you have a $1000 payment due, then you would add $50 to the next invoice, if you haven’t received payment. That percentage should be clearly stated on the original invoice.
Your payment window should also be fair. Don’t expect to charge a late fee if the client is only delinquent by one week, for instance. A fair term is 15 days, at which point you would resend the invoice with the late fee included in the total. A friendly reminder email with the invoice can then be sent to the client.
Here’s how late fees are handled with Bonsai products. First, in the initial contract template, invoicing terms including late fees are clearly stated:
Then, in the invoice template, the late fee is a line item with clear language explaining the terms. You can set the percentage that you want, but be sure it matches the original contract.
And finally, don’t give up on late payments, and don’t re-negotiate a lower amount just to guarantee payment. It’s within your rights to expect prompt and full payment, and to have your late terms accepted if the client is delayed in their payment.
Unfortunately, there are instances when you may have to end a relationship with a client due to chronic late payment or non-payment. While it may seem difficult, particularly when you’re first establishing your business, it will be better for you in the long run.
Using high-quality invoice templates allows you to deliver a great customer experience and end your project on a positive note.
It gives you an edge in more ways than one. Here’s how:
A free invoice template comes with its own set of shortcomings. It can backfire if you don’t put in the effort to customize it effectively.
Late payments are one of the worst nightmares for a freelancer or those running small businesses. Fixing your invoicing process is a must before you take up your first project or kick-start a huge contract.
An invoice template helps you cover all bases from the start and secure your payments systematically. However, scrambling for quality invoice templates online or relying solely on invoicing software might not fit the bill if you’re looking for a customizable solution.
That’s where Bonsai can help.
Bonsai’s intuitively crafted invoice templates cover everything you need. You can also automate sending reminders and follow-ups for every invoice.
Bonsai gives you the unique advantage of framing and formatting your invoices the way you like, no questions asked. Whether it’s recurring invoices or custom ones for a partial payment, Bonsai’s automated workflow lets you create and send invoices while also following up on pending payments for you. Plus, it automatically adds a late fee for overdue invoices.
You can add multiple methods for online payments, whatever works best for you. It’ll also notify you about every invoice status.
Sign up free today and join the Bonsai community to get paid your way. Bonsai doesn’t only provide invoicing software, it brings you an array of templates and tools to pick from. Say goodbye to Microsoft Word or Google docs. Drafting proposals, creating contracts, and spelling out invoices—everything you need to run your business is now in a single destination.
At Bonsai, we recommend ALL freelancers to protect their time like it’s the most important thing in the world. Otherwise, it’ll consume you.