The complete guide to creating invoices & getting paid
Whether a freelancer, consultant, or entrepreneur, invoicing is a key component of your business. But what is the easiest and more cost-effective way to create invoices? This guide covers everything you’ll need to craft professional invoices:
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So, is it worth 2-3% of each invoice to offer your clients more payment options, avoid the hassle of depositing checks and manually tracking cash, and get paid up to two weeks sooner? For many business owners, the answer is yes.
- How to create invoices
- Payment terms on invoices
- Do I need a payment contract?
- Should I require a deposit?
- How to accept invoice payments
- Tracking invoices
- Sending friendly reminders
- The cost of getting paid
- When clients don’t pay
How to create invoices
Professional invoices build a cohesive look for your business and brand, as well as highlight the value of the work you’re providing. QuickBooks streamlines the process with automatic prompts to help you fill in the required information. Here are the essential elements you should include in each invoice:1. Company informationList your contact information and your customers’ details—legal name, business address, phone and fax number (if applicable)—near the top or bottom of the invoice.2. HeaderInclude the title, “Invoice,” at the top of your document so customers can immediately identify the communication. 3. Date, invoice number, and unique identifierInclude the invoice issuing date, as well as an invoice number or other unique identifier. This can be a simple file number, unique billing code, or date-based purchase order number.4. Customer purchase order (PO) numbers or billing codesAsk your customer about any unique details to include, such as an internal PO number or billing code. For many larger companies, these identifiers are necessary to keep track of payments.5. Itemized list of goods and servicesYour customer—and potentially, an auditor—should understand what goods and services you’ve provided with just a brief scan of the invoice. Include names, dates, rates, the quantity of the goods and services provided, as well as any price modifications, item descriptions, and your work processes.6. Payment termsInclude a due date and be aware that standard payment terms vary by industry, business, and client relations. Clarify that penalties—late fees or a percentage of the total bill—will be imposed if these terms are not met.7. Itemized feesList taxes, handling fees, or other charges, on separate lines. This is important for varying budgets and balancing your internal bookkeeping.8. Total amount dueMake sure your total amount due is clear and easy to find. 9. Instructions for payingProvide a clear set of payment steps specifying how you accept payments: online, wire transfer, check, or credit card. The more options you provide, the faster you’ll get paid.Payment terms on invoices
It’s important to include payment terms and conditions in order to clearly communicate when payment is expected and how customers can pay the invoice.| Invoice Payment Term | What It Means |
|---|---|
| Terms of sale | The terms agreed upon by the buyer and seller, such as cost, amount, delivery/shipping, taxes, payment method and payment due date. |
| PIA | Payment in advance. This lets the customer know that the full payment is expected in advance, before starting work. |
| CIA | Cash in advance. This lets the customer know when you expect the payment (in advance) and how you will accept the payment (in cash). |
| Immediate payment | This lets the customer know that the payment is expected at the same time as the product/service is delivered, or the seller has the right to repossess the product/service. |
| Upon receipt | This tells the customer you expect payment as soon as the customer receives your invoice. |
| Net 7 | Payment is due 7 days after the invoice date. |
| Net 10 | Payment is due 10 days after the invoice date. |
| Net 21 | Payment is due 21 days after the invoice date. |
| Net 30 | Payment is due 30 days after the invoice date. |
| Net 60 | Payment is due 60 days after the invoice date. |
| Net 90 | Payment is due 90 days after the invoice date. |
| Net EOM | Payment is due at the end of the month in which the invoice is received. |
| 15 MFI | MFI stands for Month Following Invoice. 15 MFI means payment is due on the 15th of the month following the invoice date. |
| 2/10 Net 30 | Net 30 means payment is due within 30 days of the invoice date. 2/10 Net 30 means if the customer makes the payment within 10 days, they will receive a 2% discount. |
| 50 Percent upfront | The customer must pay 50% of the total invoice amount before any work begins. |
| Line of credit pay | This gives the customer the option to settle their invoice over a period of time by purchasing the product/service on credit. |
| Quotes & estimates | These are the proposed prices for your products/services. |
| Recurring invoice | Recurring invoices are used for ongoing services, typically with monthly or quarterly payments. |
| Interest invoice | An interest invoice outlines the fees associated with the interest charged based on a past due payment. |
| Invoice factoring | Invoice factoring means you sell your unpaid invoices to a third party (an invoice factoring company) that will purchase the invoices from you for a percentage of their total value and take responsibility for collecting the invoice payments, giving you immediate cash on hand. |
| Cash account | Payment on a cash account is collected via cash only–no credit. |
| Letter of credit | This is documented credit confirmed by a bank/financial institution. |
| Bill of exchange | This is a promise from the customer to pay at a later date, typically supported by a bank/financial institution. |
| COD | Cash on delivery. This means payment is expected at the same time as the delivery of the product/service |
| CND | Cash next delivery. This is used for recurring services, meaning the current delivery of the product/service must be paid for before the next delivery date. |
| CBS | Cash before shipment. Payment is expected before the product is shipped |
| CWO | Cash with order. Payment is expected at the time the order is placed. |
| 1MD | Monthly credit payment of a full month’s supply of goods/services. |
| 2MD | Monthly credit payment of a full month’s supply of goods/services, plus an extra calendar month. |
| Contra | The customer’s payment is offset against the value of supplies purchased from the customer. |
| Stage payment | Payment made on an agreed amount at that stage (of installments). |
Do I need a payment contract?
A payment contract can clarify and solidify a customer’s expectations. You should discuss and come to an agreement on important terms, including:- How you charge
- The range of services you will provide
- Your payment terms
- If you charge deposits
Should I require a deposit?
A deposit of between 30-50% can protect you if client troubles arise. Outline the parameters in your contract, make sure your clients are aware of your policy, and issue an invoice for the deposit amount. When the job is completed, issue a second invoice deducting the deposit amount from the total owed.How to accept invoice payments
CashCash transactions have no fees, but they cannot be tracked. It is also difficult to securely transfer large sums of money, so cash transactions are rare.CheckUse a standard checking account as there usually are no transaction fees. However, checks require that you manually update your books and your invoice tracking system. Automated Clearing House (ACH)An ACH transaction transfers funds from your customer’s bank account to yours electronically. ACH transfers are fast and secure. Your customers will need to supply their transit and account numbers.Credit and debit cardsQuickBooks users can accept both credit and debit cards. Transaction fees vary slightly based on the payment platform, but typically range from between 2.4–3.4%.Do you accept a lot of payments in person? With products like Square and the QuickBooks mobile card reader, you can take credit and debit card payments on the spot. And if you deal in online transactions, PayPal is a great option (and typically has fees of 2.9%). Plus, all integrate seamlessly with QuickBooks software.BitCoinLess common than traditional payments, crypto currency transfers are simple for QuickBooks customers—just turn on your PayByCoin feature.Tracking invoices
If you’re creating your invoices in Word or Excel requires meticulous organization, can leave you open to information loss, and error. QuickBooks’ features take the guesswork out of invoice tracking:- Automatically generated invoice numbers
- Sorting invoices by client name
- Providing a clear balance sheet of sent invoices
- Identifying past due invoices
Sending Payment Reminders
Payment requirements are typically set at 30, 45, or 60 days. But a month is a long time and a payment due date may be forgotten. With the payment reminders feature built into QuickBooks, you’ll get the prompts, reminders, and organization you need to make sure invoices don’t fall through the cracks. Here are a few examples for how to write a payment reminder message for your customers/clients. You can customize them to fit your specific needs and match the relationships with your customers. Day 15 – Polite reminder email example“This is a friendly reminder that payment for invoice #0036, in the amount of $1,500 will be due on September 12, 2017. Prompt payment is very much appreciated—please let me know if you have any questions.”Day 30 – Late payment email example “This is a friendly reminder that I have not yet received payment for Invoice #0036 in the amount of $1500, due September 12, 2017. Please let me know if you have any questions.”Day +30 – You may want to call themOnce an invoice is more than 30 days late, picking up the phone and giving them a call is a great way to go. It’s best to assume honest oversight over intentional malice, but it’s ok to let them know that quick payment is appreciated.The cost of getting paid
With so many payment methods and fees, it’s tempting to stick to good old-fashioned cash and check. But other forms of payment can attract more customers and even get paid up to two times faster. But, is it worth it? Cost vs. loss comparisonSam’s latest client, Ms. Ramirez wants to buy a 3,600 square foot house and needs it inspected and tested for radon. After completing the inspection, Sam issues her an invoice for $1,000 (his fixed rate of $0.25 per square foot x 3,600 square feet = $900, plus $100 for radon testing).Here’s a chart of how much of that $1,000 Sam will end up keeping depending on which type of payment he accepts:
So, is it worth 2-3% of each invoice to offer your clients more payment options, avoid the hassle of depositing checks and manually tracking cash, and get paid up to two weeks sooner? For many business owners, the answer is yes. 
