Start Invoicing as a Freelancer
Posted by Jo Lodge on 16th April 2024
If you're new to the world of freelancing, you might find yourself puzzled about where to begin with invoicing. What is an invoice? Is it a legal document? What do I have to include on the invoice?
I created this guide to walk you through the steps needed to send your first invoice to help you get paid promptly and maintain good relations with your clients. It covers all the invoice components, detailing what to include in each section.
What is an Invoice, and why are they needed?
An invoice is a legal document that a freelancer (seller) sends to a client (buyer) to request payment. It should provide a clear, detailed record of what the client is being charged for, the amount due, and when it needs to be paid. Invoicing is not just about asking for payment; it contributes to your professional image and is a document required for tax records.
What to include on an invoice
An invoice contains several key components, including your information, client information, invoice number, date, description of services, total amount due, and payment terms. This part of the guide will delve into each section, offering examples and explaining why each is essential for creating a well-structured invoice.
What needs to legally be included on an invoice differs by country or in the US by state. Links to some countries' legal sites can be found at the bottom of this article.
Freelance Invoice Example
The image below is an example of a well-structured invoice, which incorporates all the key sections discussed in detail in this blog.
What to Include on an Invoice
Your Contact Details
The invoice should include your contact and identification details. This ensures that your client knows exactly who the invoice is from and how to contact you with any questions or issues. Here's what to include:
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Your Name and/or Company Name: Whether you're freelancing under your name or have a business name, ensure this is prominently displayed. Usually, this is in the top right-hand corner of the document.
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Your Company Logo
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Address: List your business address. If you work from home, you may use your home address or consider a business postal address for privacy and professionalism
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Contact Details: Provide details on how your client can contact you. Typically these would be your email and phone number, but could also include your social media details.
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Company Address: List your business address. If you work from home, you may use your home address or consider a business postal address for privacy and professionalism.
Client Information
Include the client's name and address in the top section of the invoice. Note that the contact for an invoice may not be the name of the client you are dealing with. Some larger companies have a finance department to which the invoice should be addressed. Check who the invoice should be addressed to with your client.
Invoice Number
Add a unique number to each invoice, the number can include letters and special characters. The exact format of the number can vary depending on your preferences and the complexity of your business. Here are a few options:
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Sequential Numbering: Each new invoice receives the next number in the sequence. For example, if your last invoice was 100, your next invoice would be 101. This is the most basic and easily implemented format. best practice is to start the numbering from 001 (not 1).
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Date-Based Numbers: Add the date in your invoice number to help you quickly know when the invoice was issued. Formats might include the full date or just the year and month, such as 202404-001 for the first invoice of April 2024.
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Unique Client Code: Add a client code or initials into the invoice number to easily identify who the invoice is for, e.g., "SMITH-101" for the 101st invoice issued to Smith. I recently had a client who requested this format for their financial management purposes.
Invoice Date and Due Date
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Invoice date: this should be included and is the date you finalise and issue the invoice, which is often the same date you send it to the client. This is required to calculate the due date and is essential to include for tax purposes, it'll determine which financial year the invoice should be recorded in.
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Due Date: is the date you expect to have received payment from the client. This ensures both parties are clear on the timeline for payment and can prevent misunderstandings. Generally, the time between the invoice date and the due date is agreed with the client before you start work. It is typically negotiated during the contract or agreement phase and should be part of your standard terms and conditions or quote.
Description of Services or Line Items
These are the details of the specific services or goods you provided to your client and are asking payment for. They are usually displayed in a tabular format in the central section of the document. The components to include are:
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Description: A brief description of the goods or services
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Hours or Quantity: If applicable, add the number of hours/days worked or the quantity of goods provided.
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Rate: State the charge per hour or per item.
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Total Cost for Each Service: Provide a subtotal of each service (Quantity x Rate).
Your Company and Tax numbers
If you have a company registration number and tax identification number (such as a VAT or TIN) you should include them on the invoice. These numbers help establish the legitimacy of your business and are often required for tax purposes by your company and the client.
Place this information in a clear and consistent location on all your invoices. You can include it either in the header near your company's name and contact details or in the footer.
Total Amount Due
The totals section summarises the amounts from the line items table, calculates applicable taxes, and adds any additional charges, such as shipping, to provide the client with the total amount due. Below is a breakdown of the details required:
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Subtotal: This is the total of the costs of all services or products listed on the invoice.
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Tax: List the details of the applicable taxes, such as sales tax and VAT. Each type of tax must be displayed separately with the corresponding rate and the amount it adds to the subtotal.
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Discounts (if applicable): Details of any discounts applied to the subtotal of services
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Total Due: This final amount includes any taxes and subtracts discounts from the subtotal of the line items, providing the total amount due from the client. Ensure this figure is prominently displayed.
Payment Details
This is an important section of the invoice, it is where you provide details on how the client can pay you. List and detail all acceptable payment methods, this is normally placed at the bottom of the invoice. Here are some common payment methods:
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Bank Transfer: Include your bank account number, sort code, or IBAN. Provide any additional banking instructions if necessary.
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PayPal: Provide your PayPal email address. Adding a direct payment button or link can make the process even easier for clients.
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Credit Card: Specify how clients can securely submit their credit card payments. If using an online portal or a third-party service, provide the relevant link or instructions.
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QR code: Include a QR code on the invoice that clients can scan to make a payment. Clearly indicate which payment services or apps are compatible with this QR code.
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Cheques: Indicate to whom the cheque should be made payable and provide the mailing address.
Additional Details
So far I've discussed the essential sections of an invoice, you can add other relevant additional information to the invoice too. For instance, adding Purchase Order numbers (PO Numbers) may be needed when dealing with larger organizations that track their orders and payments through these unique identifiers. Additionally, you may need to specify the currency for payment, or other information such as project codes, client references, or specific payment instructions.
Closing Thoughts: Invoicing Made Simple
This blog has detailed the components of a professional invoice, you should now have a better understanding of what is required to send your first one as a freelancer!
Stay tuned for our next blog which will review a a range of online invoicing tools. Meanwhile, check out Pop Invoice, our online tool that seamlessly integrates with Notion and offers a streamlined approach to creating and managing your invoices.
