Invoicing customers is a crucial part of any business. It’s how you ask for payment for your services or products. But, how often should you send invoices to keep both your cash flow healthy and your clients happy? This depends on several factors, including your type of business, cash flow needs, payment terms, and what you’ve agreed with your clients.
Understanding Your Business Type
Different businesses have different invoicing needs. For example, a freelance graphic designer might invoice at the end of a project, while a landscaping company might invoice monthly.
- Service-Based Businesses: Often invoice after completing a service.
- Product-Based Businesses: Usually invoice at the time of sale.
- Subscription Models: Invoice on a regular, recurring basis (like monthly).
The Impact on Cash Flow
Cash flow is the money moving in and out of your business. Regular invoicing can help maintain a steady cash flow, which is vital for business health.
- Short Payment Terms: Can improve cash flow but may be challenging for clients.
- Long Payment Terms: Easier for clients but can strain your cash flow.
Setting Payment Terms
Payment terms are how long clients have to pay an invoice. Common terms are Immediate, ie on receipt, 7, 14, 30, 60, or 90 days. Your terms should balance your cash flow needs with what’s reasonable for your clients. Don’t volunteer long payment terms, start with asking for payment on receipt of the invoice. Let clients negotiate upwards from there, but do consider what it might cost you to finance this. For example, if you have bought materials and have to take out a loan to pay for these while you await payment make sure you build that into the cost.
What does the Contract say?
Always refer to your contract or proposal. It should clearly state your invoicing schedule. This helps avoid misunderstandings. It’s best to make the payment terms clear before you start to deliver a service. Build this into any Proposals, Contracts and Terms and conditions you issue.
Might have milestone payments. For example a web designer might charge 50% as a deposit at the start of the project, 25% when delivered for testing and 25% when the new website goes lives. In that example agree either payment on receipt or payment within 7 days or you risk the next stage being ready before you have been paid for the first stage.
Often have a regular invoicing schedule, like monthly. For example, Virtual Assistance and SEO’s often charge a monthly retainer or service fee. For services like this try and negotiate an annual upfront invoice and offer a discount for paying a year at a time, 12 months for the price of 11 is a good example.
Who does the invoice need to be sent to?
Make sure you get the details of where your invoice needs to be sent to. Large companies will have Accounts Payable departments that will have procedures for getting you set up as a vendor. Get this sorted out upfront or it could delay payment.
What information needs to be included on the invoice to get it paid?
I advise asking this upfront as most large companies will need to issue you vendor numbers and purchase order numbers to be quoted on your invoices. Without these, you won’t get paid!
Communication is Key
Talk to your clients about their preferences. Some might prefer less frequent, consolidated invoices, while others might like regular, smaller invoices. Don’t forget you are in charge here, don’t overthink this and try and push to invoice on completion, weekly or monthly. Anything longer than monthly is unusual apart from annual service invoices.
Using invoicing software can make it easier to send invoices on a regular schedule. This can save time and reduce errors. Some systems can automatically send reminders if payment is late.
Get your invoices raised and out to clients as soon as possible. If you invoice monthly try and do it on the same day each month. Clients can sometimes take longer than you would like to get around to paying you and one thing is certain, the clock won’t start ticking until you’ve sent them the invoice.
How long should I wait for an invoice to be paid & how often should you send invoice reminders?
Once an invoice is due for payment give them 7 days and then start chasing weekly. Know your client and if they are on holiday make allowances. But don’t just leave it… the longer you wait the less likely you are to be paid. Don’t worry about chasing, if you upset them and they don’t give you more work you’ve just lost a client that doesn’t respect you enough to pay on time. You don’t need clients like that!
Conclusion: There’s no one-size-fits-all answer to how often you should invoice. It depends on your business type, cash flow needs, payment terms, and client agreements. The key is to find a balance that keeps your business financially healthy and your clients satisfied.
If you have any questions or feedback please leave a comment below.