How To Create An Invoice For Transparent Payments

Derek Abram
CEO of Prio
8 min read

While working as a freelancer may bring with it a lot of freedom—in that you get to choose when you work, with whom you work, and how much work you take on—it also brings with it a lot of additional responsibilities. 

Among the most important, and often most repetitive of these responsibilities, is that you need to generate invoices every month.

Greenhorn freelancers are often caught off guard because a lot of them don’t know how to create an invoice, having never done it before. 

Well, here are some pro tips pointing those of you who are new to the concept of creating an invoice in the right direction. 

What is an invoice?

Simply put, an invoice is a legally binding document that the seller of a product or service, or in this case, a freelancer, gives his customers or clients upon delivering the product or service, indicating the payment due for the same. 

However, an invoice has more implications than just a demand for payment. Let’s take a closer look at why invoices are important.

Why create an invoice as a freelancer

History shows us that tradesmen have been using invoices from times immemorial, which means it’s hardly a new business requirement. There exist records of invoices etched in stone dating back to 5000 BC in ancient Mesopotamia. 

The next stage in the evolution of invoices was probably handwritten invoices, a practice that is still followed by small businesses in some corners of the world.

With the advent of computers and printers, the format of invoices changed once again. And invoices in today’s day and age are paperless, made almost exclusively online and on mobile devices. 

In fact, there are now tools that automate the entire process of creating an invoice, making sure freelancers get to focus their energies on tasks that are less redundant. 

An invoice does a lot more for freelancers than just reminding clients that they are owed money at the end of a project. Let’s take a look at why invoices are important for freelancers.

Helps you maintain records

Invoices help you keep track of the clients you have worked with, including details of who your clients were, when you worked with them, and how much you were paid. 

Helps with payment tracking

As a freelancer, invoices will help you and your clients keep track of how much money is owed and by what date. This makes following up easier as well.

Helps with taxation

Once you start working as a freelancer, you are responsible for paying your taxes on time by yourself. Invoices will help you stay on top of how much you’ve been paid within a time period, based on which you can accurately calculate how much you will need to pay in taxes.

Helps with marketing strategies

Invoices are sources of important data, such as when your clients request more work from you, when your lean periods are, which business verticals you service the most, and much more, all of which can be useful in helping you formulate successful marketing strategies. 

Helps with legal protection

An invoice is a legal proof that you are owed money for services rendered, and will protect your interests in a court of law should your clients try to not pay you. 

How to create an invoice template

One of the many positives of being a freelancer is that you get to work with multiple clients, often during the same time period. What this also implies is that you will need to keep making invoices to send to each of these clients at the end of each project. 

And this can get tedious, repetitive, and quite honestly, boring.

An easy fix is to create an invoice template on Google Docs with fields like your name, address, preferred payment methods, and more prefilled. 

That way, every time you need to create a new invoice, all you need to do is fill in the unique fields, convert it to a PDF and email it to your clients.

Here’s an easy guide to creating invoice templates. 

1. Begin with the title and logo

Every invoice should have a title that reads “Invoice” in bold. There are two reasons why this is important. 

The first is that by mentioning what document it is, the invoice becomes a legally accepted document. It will also help you differentiate it from other business documents.

The next thing on the document ought to be your business logo if you have one. The ideal place for your logo is either under the ‘Invoice’ title or on the right of the header in a borderless table.

2. Business name and contact information come next

Every invoice should have your name or the name of your business, as the case may be. 

Another related field that is mandatory is your contact information, including your official mailing address, email address, and phone number(s).

3. Include your client’s name and contact information

Your client’s name and contact information are also required on the invoice. 

If, for example, the invoice needs to be addressed to a particular individual in a business, be sure to add the business name first, followed by the person’s name and title. 

If any of your client’s contact details are not already with you, be sure to reach out to them and populate the same. 

4. Add an invoice number and invoice date

An invoice number is essential for each invoice to be unique, and for it to be easily trackable when needed. 

However, making each invoice number does not need to be a complex activity. Some people number their invoices according to the date. For example, if the invoice is generated on the 10th of October this year, the invoice number could be 101022.

The invoice date is important to facilitate ease of payment, so you know when you sent the invoice and when the payment is due. Remember that different countries have different date formats. 

For example, Americans always write the month first, the day next, and the year last. An easy approach may be to use words and numbers, such as Oct 10th, 2022. 

5. Mention the payment due date

Be sure to mention the date on which your payment is due from your client. There are various ways in which freelancers mention the payment due date.

Some freelancers offer their clients a credit period to clear their payments.  

For example, if the payment is due 60 days after the invoice has been raised, then mention the payment due date as Net 60 on the invoice. This means if the invoice was raised on 15th June, 2022, then the payment is due 60 days from then, irrespective of weekends and holidays. 

If the invoice reads 30 EOM, it means that the payment is due 30 days from the end of the month. For example, if the invoice was raised on the 20th July, 2022, the payment due date would be 30th August, 2022.

If the invoice says “payment due on receipt”, it means that the customer ought to pay you as soon as they receive the invoice. Alternatively, you could also mention the date by which you need to be paid.

It is worth noting that you ought to have ideally also mentioned the payment due date under the payment terms section of the contract you sign with your clients prior to starting work on the contract. 

6. Don’t forget to add line items

Line items are the details of the work you are asking to be paid for. For example, if you are a freelance content writer, you could simply mention “Content Work for October” if you’re being paid a flat monthly rate for your work.

However, if you’re getting paid a per-word rate to write blogs, you would be better off mentioning each blog date, title, rate per word, the total number of words, and the amount you are owed per blog post. 

7. Total everything up

The next thing you need to add is the total of the line items, which is how much you need to be paid. 

Then, add any applicable taxes to that number. If there are any late fees or discounts you are offering your clients, mention those as well.

Finally, mention the total amount that ought to be paid to you for the projects mentioned in that invoice. 

8. End with terms and conditions

This final section ought to mention any special terms and conditions that apply. Here are some examples of what to include.

Mention when the payment is due and if you have received any payments in advance. This would also be a good time to mention what taxes have been included and who is responsible for paying them. 

If you offer your clients a return time period or a feedback window, be sure to include those details as well.

Also, mention if you offer any discounts for early payments or late charge fees. Both work as catalysts to speed up the payment process. 

And finally, be sure to mention how you prefer to be paid (PayPal, account transfer, etc.). 

Pro tips for a smooth invoicing process

Now that you have an idea of what the ideal freelancer invoice ought to look like, we’d like to leave you with some pro tips for a smooth invoicing process.

Communicate payment terms in advance 

Before you begin working on any freelance project, be sure to execute a contract with your clients, protecting both of your interests. 

A part of this contract should include your payment details, including how much you charge, when you need to be paid, and your preferred means of receiving payments.

Keep your invoices organized

Invoices are invaluable to freelancers, both legally and financially, especially when you need to follow up for payments and pay taxes on the same. This makes it important that you keep your invoices organized and easily accessible.

Since most invoicing is now done online, an easy solution would be to create folders for each of your clients and save dated invoice copies in those folders every time you send one out.

Send invoices in the correct format

The accepted format for sending invoices by email is a PDF document. Be sure you save your invoices as PDFs before sending them to your clients.

Inform your clients about your preferred payment method

It is in your best interests to keep your clients informed about how you’d like to receive your payments. 

For example, a lot of freelancers prefer to get paid by PayPal, especially when working with international clients, while other freelancers prefer to get paid by bank transfers.

Get Prio to automate your invoicing process

As we mentioned earlier, making invoices can get tedious and monotonous. However, it doesn’t have to be a tiresome chore every time you need to generate an invoice. 

With Prio’s invoice generator, you can generate invoices in three easy steps. And the best part is that you can use this amazing tool for free! 

When should you send an invoice?

Ideally, you ought to send your clients an invoice at the end of every billable project. 

However, this could vary depending on the nature of the project and your contract with the business you’re servicing.

For example, some projects have multiple stages, and each stage may warrant a portion of the payment to be released. In these cases, you will need to raise an invoice upon completion of each stage.

Some clients like to be sent a monthly invoice instead of one for every project you work on, while others may prefer that you send them a separate invoice for each project you complete for them.

Either way, using tools like Prio’s free invoice generator can help you save time and streamline the way you service your clients. 

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