Q&A: "How do I set up an invoice?"

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When you’re starting your own business, you’re going to figure out that there’s a lot you don’t know; and what’s more, you’re going to figure out that you don’t know what you don’t know. When I started my own production company, one of those things that I didn’t know that I didn’t know, was how to put together an invoice. I remember landing my first client. It was a ton of really hard work and when it paid off I was really excited to… well... get paid. But then I realized, I had no idea how to get paid. This memory came rushing back when I got this question from Money Minute reader Jason. Here he is:

Hey Nicole! My name is Jason and I live in Boston. I have been trying to get into the freelance game and I’m starting to get my first couple clients! They asked me for an invoice and I’m realizing that I have no idea how to put one together. I want them to think I’m professional so I don’t want to make any mistakes. What should I put on the invoice? Thanks!

Congrats Jason on landing your first freelance gig! Thankfully putting an invoice together is really easy— and I’ll make it easier for you by giving you a straightforward checklist of the things you need on your invoice. Before we dig in, I will say that there are services you can pay for (like Quickbooks), which will automate this process for you. But if you want to go the DIY route, here are five items that you should include, in the order I recommend they appear on your invoice from the top of the page to the bottom.

1. The first thing on your invoice should be your info.

Specifically: your full name, your company’s name, your company’s address, your email, your work phone. If you haven’t set up a business entity yet, I highly recommend you do before the invoices start rolling in. But in the meantime, you can use your personal address and skip over including the name of your business.

2. Your client’s information.

You’ll need all the info that you included for yourself in point #1, but now for your client: their name, their company’s name, their company’s address and so on.

3. Invoice details.

This includes the invoice number, the date the invoice was generated and the payment terms. Including the invoice number will help you keep your finances organized, which is always helpful, but will become extra helpful come tax season.

When it comes to payment terms, there are a few options. Before sending an invoice to your client, you should mull over which option works best for you, and then confirm the terms work for your client.

One of the most common payment options is “due upon receipt” which is the most expedited payment option. It’s basically like saying: I need you to send me the money as soon as you see this, k thanks bye. With “due upon receipt” terms, payment is typically expected in one business day. It’s a pretty common payment method, but not every client will agree to it because, depending on your industry, some clients will need time to evaluate the work you’ve done for them before payment is completed. If your client does not want to go with a “due upon receipt” payment method, a really common alternative is “N30” also known as “Net 30.” With a Net 30 invoice, your client has 30 days to make a payment after the invoice is issued and sent to them.

If you wanted to do a Net 30 invoice, I’d recommend including the payment due date so that the client doesn’t have to do the math themselves. Try something like this:

Payment Terms: Net 30

Invoice Date: October 1, 2022

Due Date: October 30, 2022

4. Next, outline the goods and services.

This is what we’re all here for, right?

It’s standard practice to put this information in a table because there are a few key pieces of information to convey. The goal is to provide your client with a clear breakdown of what they’re being charged for, right? If you do go the table route, here’s how you should set it up:

The first column should be dedicated to the descriptions of the products or services you provided; this could be a physical product, like a piece of writing, or something more abstract, like an hour of consulting work.

Next, create a column to denote the quantity of the product that your client received. Then, a column for the rate you charge for that product. The last column in your table should be dedicated to the subtotal, which will be the quantity of product your client received times the price you charge for that product.

At the bottom of the table, you should put in bold the grand total of what you are owed, which should be the sum of all the numbers in the subtotal column.

This might sound like a lot of columns and tables and math, but you’re actually more familiar with this format than you think. It’s the exact same format as a bill at a restaurant. Don’t worry, we don’t have to reinvent the wheel here!

Example template here:

Source: https://legaltemplates.net/form/invoice-template/preview/

5. Show me the money!

The last thing on your invoice should be a note to the customer outlining which payment methods you accept. Some people I work with include their banking information in their invoice, so that I have all the information I need to send a wire immediately. That works for me, but not all vendors will handle your bank information with secure protocol. Instead of putting your bank information in the invoice itself, you could carve out some space at the bottom of the invoice to write a note thanking your customer, outlining the payment methods you accept and the instructions for completing payment. For example, you might want to say: “Thank you so much for choosing to work with me! I accept payment through ACH Transfer. Please call my phone number to confirm bank details.”

Don't forget....

Nothing in your invoice should surprise your clients. The moment your client opens your invoice should not be the first time your client is seeing your rates or your payment terms. That leads to tough conversations, tumultuous partnerships and the chance that your client can’t actually afford you. Instead, you should confirm those details right after you and your client settle on the scope of work. In business relationships, just like romantic relationships, communication is key.

xo,

Do you want to get rid of debt, lock in that raise, plan for your best retired life, find unclaimed money and generally cruise along the road to financial freedom? Here are more ways to get it together and get it all:

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