An invoice is simply a means to an end. All an invoice does is tell the client what you think you’re owed. The overriding objective, of course, is to enable you to be paid as soon as possible. So it’s essential that your invoice is
Okay so far? Easy. But there’s much more to the art of invoicing. And while invoicing may seem to be a fairly simple process, it can cause you great problems with your clients if you get it wrong. Also, remember that the main object is for you to get paid as quickly and as efficiently as possible. So here are a few things to consider.
When do you invoice?
Most consultants invoice at the end of each month; that’s what I’ve done most of the time in my consulting career. If everything goes according to plan, you should get paid approximately one month after your invoice is received. Therefore, if you start a project on September 1 and invoice on September 30, all being well, you’ll be paid around October 31. In other words, you’ve completed two months of work before you see any cash at all. With cash flow being such a crucial factor, that’s less than ideal.
One way to improve cash flow is to invoice up front. So if the project is three months long, invoice one third on receiving the go-ahead, one third after month one, and the remainder after month two.
Usually you state your invoicing schedule within your proposal, and if it’s a new client, it should have been discussed at a prior meeting. In my experience, most private clients are happy to pay reasonable upfront invoices. However, generally public clients, such as governments, utilities, and municipalities, are not. In these cases, unless you can negotiate something specifically, you will take the cash-flow hit.
How much do you invoice?
My advice is to invoice as much as you think is reasonable. One way is to divide the job up time-wise, so a five-month job is invoiced at a rate of 20 percent per month. This is fine except when the work on a project is weighted toward the front end. In that case, there’s nothing wrong with, for example, the first two invoices each for 35 percent of the total and the remaining three at 10 percent.
What about expenses?
In my experience, more problems are caused with invoicing expenses than anything else. The neatest way is to avoid expenses altogether by simply agreeing on a total price for your services, including fees and expenses. One company I know quotes its fees and adds 8 percent to cover expenses, which is okay except when your client knows that expenses will be a very small component of total job costs.
If you’re on a project where you’re required to break down expenses, make it clear and simple, and please, please, err on the side of omitting anything you think may cause a problem. In other words, if you bought a new pen or legal pad, don’t charge those costs. If you had seven cups of coffee that day, charge two at most, but preferably none. You may laugh at these examples, but I’ve seen both and many more besides. Think of the client reactions: “I’m paying you $200 an hour, and you can’t pay for your own paper?” or “Why should I fund your caffeine addiction?”
On a final note, if you have any concern about your invoice prior to sending it, notify your client and discuss it. It’s far quicker and will be perceived as more professional to preempt an invoice problem than to send it and deal with the fallout.
As always, I welcome your comments and insights. Thanks.
As a highly experienced consultant and author of “Consulting Made Easy”, Adrian assists consultants, or would be consultants, to achieve success on their terms in their own consulting businesses. Adrian helps consultants increase their fee rates, find more clients, have more free time and have more fun.
Contact Adrian at email@example.com to learn more.
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