Have you ever bought something and received the invoice as a Word or Excel file? Well, chances are, if you’ve outsourced some work to freelancers in the past, you probably have. As for myself, freelancers are the only group of people who have ever sent me such invoices. If I had to give you a number, I’d say about 4 out of 10 freelancers do it. And it totally blows my mind. It’s not even just the newbies. Established, seasoned, (otherwise) highly professional freelancers do it, too.

As you hopefully noticed in my first post about briefings, this little series is not about shaming “my” freelancers. I do believe that they all appreciate my honest feedback, me being one of them (a freelancer) and giving them free advice on how to come across more professionally when they work with other clients. I believe to be in a position to do so because I’ve been on “the other side”. That was until 2009. So I do know how companies or purchasing departments work and what they usually expect from a service provider.

In today’s post, I want to share some thoughts on invoicing. From my practice, I would say there are 3 major issues that we need to address here.

1. File format
2. When to issue invoices
3. How we handle late payers

Let’s go into details.

File format: To Word or not to Word—that shouldn’t even be the question!

It doesn’t matter which software you use to issue your invoices. Although I would highly recommend that you use dedicated invoicing software. It facilitates client and contact management, offers templates for quotes and invoices (and payment reminders), gives you graphs and figures to track your turnover and spendings, helps you organize your financials, and more. Not to forget the no-fail continuous numbering of your invoices. Not sure if it’s important in your country, but in most European countries you have to issue consecutively numbered invoices by tax law. However, I get it that some freelancers will want to stick to their own system, using Word and/or Excel. Each to their own and what works best for them. Honestly.

What I do plead for, however, is that you do not send your invoices as Word or Excel files. Create a PDF. There is free software out there that you can use. A free one that I recommend is PDF24. Besides creating PDF files, it does a whole lot more. It works with all Office programs and has a lot of features you wouldn’t expect from free software: You can create PDF files from almost any application that lets you print a file, re-order pages, merge, split, and password-protect your existing PDF files. And it comes without any branding. Most free PDF converters will put their logo somewhere on your document. If you use a Mac you’ll find a plethora of inexpensive apps to download from the App Store.

No client will think Oh good, this is a professional freelancer, they sent a PDF! But if you send a Word or Excel file, they will notice. And you will come across as the amateur freelancer who works from their kitchen table. I’ll give you my word for it.

Word and Excel files are also easy to manipulate. Of course, one could also edit a PDF file. So technically, your PDF invoices should also have a digital signature. Our friend Google can help you with that one. But at least converting your file into a PDF will already make a huge difference.

Why do Office files bug me? Formatting. From page dimensions (really shitty in Excel) to fonts and font sizes… People tend to forget that Word and Excel documents will look different on other people’s computers. The reason is that they run different systems and software versions and their default settings are different. So in most cases, the document will look different on my computer (especially since I’m using a Mac) than on the computer with which it was created. And when I want to print those invoices (on paper or save them as a PDF), I will always have to go into the settings and change the formatting. Think line breaks, automatic syllabication, US letter format vs. DIN A4, and so on. And it’s even worse with Excel.

Noticed how much one can say about file formats for invoices? And this doesn’t even touch the mandatory information that you need to include. Your national trade association or tax advisor will be able to tell you which information your invoice needs to include to meet legal requirements.

On VAT

Just a quick question for freelancers based in the EU: Do you ever check your business partner’s VAT before issuing a quote and/or invoice? Well, you better be doing it. All countries within the EU are subject to the so-called reverse charge procedure and this procedure requires that you check (and prove that you’ve done so) that your business partner’s VAT is valid and that they are thus entitled to take part in the reverse charge procedure. If you want to read more about it, start here and here. Check your national tax authority’s website to find out how to verify a VAT number. Shortcut? Go to VIES.

When should I issue my invoice?

It depends on what you agreed upon with your client. Personally, I send my invoice with the deliverables and my invoices are due immediately. This works for me because for one, I only work with direct clients and secondly, because that’s how I work. In Germany, for instance, translations and other performed-to-order services are considered a work performance for which payment is due immediately. Any payment terms other than immediate payment are to be negotiated between the parties involved. But by law, they are due immediately, unless agreed otherwise. Of course, sometimes clients will ask for a 10-14 day payment term and usually, it has to do with their internal workflows. I’m the last who wouldn’t be willing to find an agreement. But generally, I don’t accept any payment terms longer than that. I know this is harder to negotiate with agencies. But their cash flow isn’t our problem. With some clients, I also have retainer agreements. Other clients, who send work regularly, I charge on a monthly basis. But I always issue my invoices asap.

This is a very sensitive subject. Sometimes these issues occur and then you need to handle it professionally. Instead of posting somewhere online what a jerk your client is, try to find a compromise. Nobody gets into these situations on purpose. Extend the payment term or suggest payment in installments. If they are going through a hard time they will appreciate your understanding and value you even more as a business partner. Especially once they overcome their situation and are back on track. You will be their go-to-freelancer and in turn, you can count on them when you happen to be in a situation where you need their understanding (sickness or the like).

True story

I had a multi-lingual project in September 2015. 15 translators worked on it for me. Now it’s almost February 2016 and I still haven’t received all their invoices, although I’ve asked for them. The No. 1 reason they gave me: I haven’t had the time to issue it. No. 2 was Oh, I tend to forget about 3-digit invoices… I’ll take care of it soon. (Well, thanks for making me feel insignificant! – LOL, he knows who he is and this is sort of an outtake from our conversation.)

It’s none of my business when you issue your invoices and I won’t judge you. But it doesn’t really leave a professional impression with clients. Professional services are not only about delivering an impeccable job. A healthy attitude towards your own cash flow proves that you have a sense of doing business professionally (think eye-to-eye level) and that you value your own work (if you don’t, why should they?).

As for myself, when I’m the client, I do ask myself if these freelancers realize that I cannot close the project we worked on together until I’ve paid them. A project does not end with the delivery of files, folks!

It happens to the best of clients: Late payments

Late payments are a pain in the a$$. Been there, done that. Both ways. I’ve had late payers and I’ve been in the situation when I paid late. So again, this piece of advice comes from my own experience. The reason for late payments can be countless. Some of them include:

• Internal workflows: Many clients have certain payment cycles. Some only pay their invoices once or twice a month.
• Temporary dementia: Smaller clients (and this one applies to me as a buyer when I’m late) sometimes simply forget. When we handle many different roles in our business, things sometimes slip our mind. It shouldn’t happen on a regular basis, though.
• Cash flow issues: I am sure we’ve all been there. There are times when all your cash is used up for annual bills or perhaps your car broke down and you had to get it fixed. Or when the tax office asks for hideous advance payments.
• Typos in account information: I recently switched banks and there was a typo in my bank information I provided on the invoices. I didn’t notice until I realized that no one had paid their invoices for three weeks. Another example: A client had a new accountant and she got some data mixed up.
• Lack of respect: Don’t we all hate those? Kick them off your client list.

This list is by far not complete. But no matter what the reason is, instead of posting in an online community or searching forums for blacklisted agencies and clients, pick up the phone. Send a reminder. Ask, what the problem is and if there’s anything you should know or that you and your client should talk about.

Internal workflows

Tell you what: If you didn’t know about their payment cycles beforehand, you didn’t talk about payment terms with your client when you should have: before the project started. This is one of the things you need to talk about before you agree to work with them. It’s part of doing business. If you don’t find out until after the first late payment, don’t blame them. Keep it in mind for the next project and perhaps talk to them about a higher rate. Because each day the payment doesn’t arrive in your account, you’re basically losing interest and they are saving money. It’s really just math.

Temporary Dementia

Charming (and even humorous) payment reminders can be a wonderful tool for building lasting client relationships. You never know what the reason for late payment is until you talk to the late payer. Two years ago I had a late payer. After I sent a friendly reminder, I learned that the company was trying to cope with the sudden death of their quite young CEO and all business activities had been put on hold. Things like this happen and we’re all just human.

Cash flow issues

This is a very sensitive subject. Sometimes these issues occur and then you need to handle it professionally. Instead of posting somewhere online what a jerk your client is, try to find a compromise. Nobody gets into these situations on purpose. Extend the payment term or suggest payment in installments. If they are going through a hard time they will appreciate your understanding and value you even more as a business partner. Especially once they overcome their situation and are back on track. You will be their go-to-freelancer and in turn, you can count on them when you happen to be in a situation where you need their understanding (sickness or the like).

Typos and other (shady) excuses

As mentioned before, we are all human. A one-time late payment due to typos is okay. It can happen. But if it happens again and again, when you see a pattern, it’s probably time to come clear. One way of dealing with this type of client is to ask for honesty. Or advance payment. Try to “meet in the middle” and give them a 2-5% discount on advance payments. Now before you ask me why you should give them some leverage, look at it this way: If they pay you in advance, you will save a lot of time (=money) by avoiding “typos” and chasing your money. If you can’t agree on any kind of compromise, you might want to ask yourself if their payment attitude represents the next reason for late payment. So read on.

Lack of respect

If a client values you and your work, they will stick to what you guys agreed on in the first place. Should you feel that there’s a lack of mutual respect, save yourself from the heartache and move on. The energy you waste on these kinds of clients could be used so much more (profitably) in other projects and on other clients. Make room for those clients who value you and what you can do for them.

You should value yourself, too. Start by sending your invoices as PDF files.