As someone who is just starting out, I’m curious as to know how often many of you (especially the newbie freelancers) invoice.
Do you do the standard 30 day invoice? 14 days? Cash flow is always tough when first starting out so I prefer to invoice my clients in a shorter time period, say 14 days. Heck, if they can pay immediately then that is icing on the cake!
But I don’t know if less than 30 days is considered bad invoicing etiquette?
It’s not bad etiquette, it just makes you look like a small/freelance shop that isn’t used to dealing with very large clients. There are exceptions, but almost ALL the Fortune 1000 companies do all of their payables on a Net 30 (or even higher) because it’s just to much administrative overhead to do it otherwise. So, the vendors that deal with those clients are used to billing that way, too.
It also says a lot about your cash flow. If I have a vendor who sends me a bill and gets antsy when it’s not paid in a week, that tells me that they don’t have much cash cushion and aren’t very well established. For most well run and solid businesses, it’s fine to wait 30 days for payment in most cases.
It’s possible to get a deposit on services from larger clients, and there are plenty of freelancers that do. The ones that are making the most money, though, never ask for that kind of stuff. They have plenty of money in the back and would much rather drum up new billable work as opposed to bugging a client to pay an out-of-process deposit.
So, if you want to grow your company and play in the bigger leagues, I would settle into a nice Net 30. It’s much easier to manage anyways - once you have hundreds of payables/receivables each month you really need to get into a steady flow.
I wouldn’t say it’s bad etiquette, though!
I know alot of companies do net 60. I would try the 30 days this way you get some cash flow going.
If your’e dealing with smaller companies/sole traders and smallish projects, I’d recommend for the initial project, a 50% deposit payable before any work begins, then balancing payment due before any work is handed over/placed live. This way net 30 doesn’t really come into it - you pick up the deposit at contract sign and pick up the balancing payment at final approval meeting.
After that, you can implement net 30 for ongoing work.
I think it depends a lot on the customers you handle. Sometimes we deal with a lot of smaller customers, and invoicing is not a good idea until they have established a payment history with us. I like the idea of the 50% deposit with new customers.
We give terms based on the client. We do everything from Net 30/60 to Due Upon Receipt. Some clients are even on prepay.
On 95% of projects (100% with new clients) we get a 50-60% deposit before starting also.
It is not bad etiquette to bill at any term as long as it is the agreed upon term between supplier and client.
I like cash on the barrel head 
If I don’t like a proposed payment term, I fall back on the line that I “am not a bank”. If you need a loan please see a banker.
I agree with this philosophy 100%… and I don’t think it matters what size your company is or whats size your client’s company is.
I am the same as Brandon, the payment terms all depend on the client. Some clients may have earned a NET 30 process, some are not established so they are on the 50/50 plan, etc. I don’t believe you have a single blanket policy on billing. Different situations call for different billing strategies.
I do “on receipt” invoicing, but quietly give a 30-day grace period to everyone. After 30 days, I ask about it.
This is definitely not about “etiquette”. It’s bid-ness!
Maybe that’s bid-ness, but that’s BAD business. You are being very arbitrary with your clients, and routinely setting an expectation that is non consistent with what written terms you provide. Good business is clearly expressed terms with no ‘quiet’ anything.
Not really. Bottom of the invoice says that anything past 30 days has a service charge. But I never need to enforce that. Good clients pay. Bad clients can take a hike after I eventually get paid.
Either way, I don’t ask about it until the 30-day mark.
Oh, and never offer a discount for paying within a certain amount of time. Many companies will take the discount and pay when they feel like it anyway.
Perhaps, but in some circumstances it’s just not worth fighting. With government client and Fortune 50 companies, it’s certainly possible to get a deposit from them but the payables department won’t soon forget having to make an exception for you and not much is accomplished by it. In governments (not local ones, State/Fed) it’s nearly impossible to get a payment on a Net 30 let alone faster.
There is a real value to invoicing once per month, and having everyone on a steady flow. Our clients are credit-checked and there is really no risk of us not getting paid we have enough cash to float any situation. That’s the real risk for small businesses, the cashflow, so by having lots of reserve cash you can avoid it and free up many, many, many hours spent dealing with receivables and payables, etc.
I’m not saying that people who are doing small projects for small clients shouldn’t adjust their terms. If you can’t risk having $10,000 missing from your expected cash flow you might need to get a deposit. But, if you are dealing with clients who are slow-payers but have little risk of default AND your company is stable enough to offer terms that are consistent with the way that they do business, it just makes your company and your service that much better.
Deposits are not only for cash-flow. It’s to get a commitment from the client as well. I always take deposits form new clients, but not from old ones.
I wrote an invoicing program for a larger company ($2B annual sales). One of the requirements was that there be two terms for each invoice. The “soft” terms were printed on the invoice and communicated to the customer. the “hard” terms, often more generous, were what caused an overdue invoice action.
This sounds almost as what I do!
I request 40-60% deposit though!
When I bill it is always “Due Upon Receipt.” I have found that if you put a specific due date that means you will never get paid until after the due date. I have also found that if the due date comes and goes without payment they will just pay you whenever is convenient for them.
Depending upon your business you should really get some money up front and then money on completion. If you are delivering something and getting money upon completion you may also want to provide it in an unusable form. For example, if you create a logo for someone get some money up front and then the rest upon delivery of an approved logo. The approved logo could have SAMPLE written across it or be provided in low resolution. Then when payment is received in full you provide the high resolution logo.
Whatever you do payment terms and delivery should be understood up front. Whatever you do you do not want to get in the habit of having to chase clients for payment. That will just eat up time, cause frustration and create cash flow problems. So you need to make sure you take precautions to protect yourself.
With some larger companies they will dictate the terms and may pay quarterly or 60 days. You need to ask yourself whether the business is worth it or not. Can you do the work and carry the account on the books until it is paid? You also need to consider whether you are even likely to get paid. Here in Syracuse, NY there is one particularly notorious big entity that gets work done on payment terms and then just never pays until they are sued. This particular entity has sent many small businesses into bankruptcy. So the moral of the story is — beware! Sometimes that big client can be your worst nightmare.
Good luck.
_Gene
I usually require half up front before I start working. The final payment is always net 7 though. I don’t have time to wait around 30 days for a payment. Most clients I have want to pay and get that out of the way, so it works well.
Wow, that is a nightmare. Like the logo example, for web design it’d be better to host the site on your server first, and then transfer it upon full payment.
Yeah, that would be easy if it’s a simple brochureware site. But if you are working with CMS and have to train clients on it, then you can’t always take payment immediately. At least for me, I bill the final payment after I train them.
BTW- I looked at the poll results and I’m surprised that most of the people here bill net 14 days.