Getting paid is exciting. Invoicing… ehhh, not so much.
As a one-person business, you have to wear all the hats, all the time. That's why it pays to find the right tools to help you automate and optimize some of those monotonous-yet-necessary processes — like billing and invoicing!
Billing and invoicing gobbles up your time and energy
According to a recent report, freelancers spend 23% of their work time completing administrative activities including creating and sending out invoices, paying bills and fighting to keep those finances in check.
So if you work 40 hours per week, that means 9.2 hours are spent on admin. That’s an entire workday that most freelancers have to spend on boring and unprofitable busywork.
And even though you can't get paid for managing your business admin, these tasks are just as crucial as your billable hours. If left unmanaged, it can result in delayed payments and fractured relationships with clients (maybe even the authorities).
Freelancing is just like any other small business
A freelance business is similar to a small business in many ways. Both handle a smaller client or customer base and have a more limited budget. But there are crucial differences between the two.
As we've already established, freelancers generally work on their own. Small businesses may start alone, but their goal is always to grow and eventually hire more employees to make the workload more manageable.
Another important difference is the tax obligations between the two.
Some freelancers might not need to have a business license (depending on the local regulations), while small businesses need to deal with taxes, employees and compliance by themselves.
Many of the popular accounting solutions on the market are built for small businesses, and therefore don't cater to the needs of freelancers.
Luckily, this is changing. Today, there are a variety of business admin options designed specifically for freelancers and solopreneurs. A perfect example is Xolo Go, which allows freelancers to easily send VAT-compliant invoices to their clients in the EU, USA and Canada — without registering a company.
The definitive guide for optimizing your billing and invoicing
Set clear terms with clients
According to Boston Consulting Group, negotiating with clients is one of the top challenges faced by freelancers. It's up to the freelancers to establish their rules of engagement for payment, right from the beginning of the project. Transparency and good communication are key to establishing a positive working relationship.
Before working with a new client, settle the payment terms and policies right from the jump. Being upfront at the start of every new project can save you from potential issues down the road.
Here are some key parameters to discuss before you get to work:
- Payment methods
- Rates
- Deadlines or timeframe
- Additional fees
- Penalties
- Etc.
Establish a clear billing and invoicing schedule
You'll want to establish a definite billing and invoicing schedule right at the beginning of the project. This makes it easier to keep track of your clients’ payments and avoid forgetting about outstanding balances. The key to a successful freelance business is having a plan and sticking to it.
How should you decide when to invoice for freelance work? Overall, be flexible on the type of job:
- For shorter or one-off jobs, invoice right after completing the work.
- For longer or ongoing jobs, invoice by milestone or on a weekly or monthly basis.
If a project takes longer, you won’t want to work for months without getting paid. You will also run the risk of losing months’ worth of money if the client (*knocks on wood*) ghosts you.
Automate repetitive tasks
Freelancers get paid for their time and expertise. That's why you should see time as a precious commodity — because it is! Instead of spending too much time on invoicing and billing manually, automate the entire process.
Software solutions are built to automate tasks for you. Some of the features they offer include:
- Setting up recurring billing schedules
- Sending notifications and reminders to clients
- Accepting payments through various 3rd party payment gateways
- Creating and processing invoices for clients
- Sending these invoices to clients
You can also automate your tax calculations, including VAT. Most importantly, it ensures compliance and prevents you from incurring any liabilities with local authorities.
What are the benefits of automating your invoicing and billing process?
- Helps you save time and effort
- Minimizes the chances of error in computations
- Keeps track of all your outstanding balances with your clients so that you will never forget a payment
Design professional invoices
Invoices are a reflection and representation of yourself and your brand. So you should pay attention to the design and make sure it's polished and professional. Your invoice can be as unique as you are, but take care to design an invoice that's clear (and won't create confusion), readable and professional.
Here's a quick list of invoice must-haves:
- Your contact information
- Your client’s contact information
- Description of services
- Payment methods
- Due date
- Non-payment conditions
- Invoice number
Centralize data and processes
The best way to optimize your invoicing and billing is to have everything you need in one place. This includes your invoicing template, clients' contact details, contracts, proposals and more.
This way, you'll have everything you need for your invoicing and billing processes in one easily accessible place.
Most billing and invoicing software solutions are cloud-based, so you can easily use them without installing any software. Whether you’re sipping cocktails by the beach or having your go-to coffee in your favorite cafe, you can always access, monitor and send your invoices right from your laptop or mobile device.
Of course, there are a variety of software solutions to choose from nowadays. A good place to start is by checking out the best invoicing software for freelancers in 2021. The most popular one won’t always be the best choice for you and your business, but it’s a good starting point to narrow down your options.
Supplement your freelancer tools with the right knowledge
Investing in the right invoicing and billing software can get you far with your freelance work. However, it doesn’t necessarily solve all your finance and accounting problems. In such cases, consider consulting an expert on more complicated matters. Seek out people with a background in finance and accounting. Determine the difference between a finance degree vs. accounting degree to help you decide what kind of help you are looking for.
Fortunately, you can have the best of both worlds with Xolo Go. It is more than just an invoicing and billing software for freelancers. It is an all-in-one platform where you can also manage your expenses and accounting. Want more freelancing tips? Subscribe to our newsletter (below).