Invoices seemed strange to me, like some sort of tax form with a cryptic alphanumeric name. I thought that only large corporations exchanged these documents as part of their bureaucratic repertoire of red tape and a general tendency to slow or evade getting things done.

It wasn’t until I started freelancing that I took an interest in securing my contracts, and making sure there was a legitimate paper trail between my clients and I, so that I could get paid for the work I had done. One way I could keep track of all the money that was owed, and paid, to me was to write invoices.

It all boils down to that, an invoice is a request for money for products or services provided to your client.

So why should you write an invoice? The obvious answer is that so you can get paid. The list of not so obvious answers is what we will talk about in this post.

Let’s get serious.

You can send out an email or call your client asking them to pay you, however, it is not always culturally accepted and sometimes considered rude to talk about money directly. Sending an official invoice document is the standardized method of conducting business between parties.

Another advantage of using an official document is the authority it brings with the request.

As long as your invoice is not written on a napkin, your client should take the document seriously and honor the contract (which you also hopefully have) to pay your for your services.

Let’s get paid.

An official invoice does not only increase your chances of getting paid, it can also decrease the latency before you receive payment. One of the strategies to help with expediency is to include a date of issue as well as a due date.

This establishes a time frame expectation with your client, so as you near the due date, you can send them a polite reminder to settle their balance.

Let’s get organized.

If you are doing work for multiple clients, or even multiple projects for the same client, you may find yourself in contracts which pay out per milestone or in chunks.

If your clients pay you in chunks, it can get confusing to keep track of who has paid what and how much they still owe. Writing an invoice details out all the work which you are requesting money for and when that work was done. Applying payments to your invoices lets you manage how much money you are still owed.

Furthermore, most of your clients will expect an invoice so they can be reminded what they are paying you for and to maintain their financial records.

Similarly, you should make bookkeeping a regular activity in your business so that you avoid losing hair when tax time comes around. A record of invoices sent and money collected is an excellent way to keep track of your cash flow and the amount of tax you owe the government.

In addition, organizing your invoices by client will give you insight into where most of your money is coming in from, who is paying you on time and if they are consistently bringing you work.

Let’s add some security.

Your business relies on the cash flow that comes in from clients paying their invoices, however, you may find yourself in a situation where your cash flow dries up and your clients are not paying you fast enough to cover your own expenses.

In this case you can do something called invoice factoring. This means that you can use your business’s outstanding invoices as collateral to borrow money. When you eventually receive payment you use it to settle up your debt. This can be an invaluable lifeline during dry spells or when unexpected costs arise.

Hopefully this post has given you some good reasons to write invoices for your clients. Invoices will not only help you stay organized, but also expedite your payment collection, and may one day save your business. Let us know in the comments why you invoice and what tools you use to make it easier.

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