Invoices are a freelancer’s lifeblood: the pathway to payment for the work they do or the products they provide. Creating the right invoice can mean the difference between getting paid on time and having to wait months for reimbursement.
Implementing a smooth and seamless invoicing system has many benefits, the most critical being helping to maintain a steady cash flow. Your invoices should clearly delineate the service or product you provided, and your clients should be able to easily determine how to pay your invoice when they receive it, leading to prompt payment.
This post will take you through the various facets of creating and tracking your invoices, the optimal practices used in invoicing, and some pros and cons of five of the top five invoicing tools and software options available to you.
The two most common methods of charging for services are hourly billing and project-based fees. Each method has different its own invoicing processes as well as procedures and varying methods to track work.
- Payment in proportion to the work done: All you have to do is to keep track of the time you spend on each project and submit an invoice for the hours of work you completed. However, if your client has a maximum budget allotted for their project, be sure you budget your time carefully, since any hours you work beyond what is allowed by the client will not be paid.
- Comparison of your proposal with others: When you apply for new work, your prospective clients will also interview other freelancers or companies to determine who best fits their needs. An hourly rate helps clients compare prices easily. Your hourly rate is also an indication of the quality of your work and the amount of experience you have.
- Ideal for long, ongoing projects: Some projects are structured with more fluid timelines and/or a less rigid scope of work. The tasks may come to you in inconsistently or chunks; hence, charging hourly rates would be the easiest way to track your work.
In this scenario, a freelancer is typically paid a down payment, often referred to as a retainer, on acceptance of the project and the remainder of the fee at completion of the project. A rate is agreed upon for the entire project before the project is begun. When the client’s project is precisely defined or structured and you have a clear idea of the amount of work it will entail, the client offers high-value work, or manages projects that can be completed within a short period of time – billing per project may be the way to go.
- The rate is not affected by the time it takes to complete the project: As a freelancer, you will work faster on some jobs than others. By charging a flat rate, you will not lose out on earning potential by being efficient. However, if a project takes longer than expected, your hourly income may be lower than if you had charged by the hour.
- Avoid surprises: Agreeing on a rate up front means that the client won’t be surprised when you submit an invoice, and you’ll know exactly what income to expect on completion of the project.
- No need to track time: Tracking hours can be tedious, especially if you work on more than one project at a time. With per-project rates, you can move freely from project to project as they fit into your schedule.
Automated Billing and Invoicing Software
As a freelancer, time is your most precious commodity, and saving time is often at the top of your list of priorities. Automated invoicing software can give you great leverage in project management tool, planning, billing, and scheduling. It may also help track your time, determine the quantity of work completed, and project future time frames. All parameters are synchronized on one platform, making it easy for you to track and receive payments on schedule.
- Faster invoice generation: Invoicing software can create invoices in minutes. The software can be set up to allow you to automatically select values from drop-down menus, streamlining the invoicing process. The software “remembers” the details of each client, and once it is set up, you simply input service and fee details, and the system will send the invoice at the click of a button.
- The cloud advantage: Several automatic invoicing software services save your information in the cloud, and you can access that information at any time and from any device you choose. With your data stored in the cloud, there is also decreased risk of that information being stolen or misused, not to mention doing away with reams of paper invoices.
- Reduced errors: Automated billing software dramatically reduces the risks of mistakes, typos, over-writing, and missing critical details, which can cause monetary loss and damage your reputation. The more automated the process, the lower the risk.
- Automated recurring invoice process: For steady clients with continuous contracts and regular monthly (also weekly, quarterly, or yearly) billing, your digital invoicing system can be configured to send out payment requests automatically at the end of each period for a reliable and trouble-free invoicing system.
- Faster payments: Getting an invoice paid quickly depends on how quickly you submit the invoice. Software enabled automated invoices are sent promptly, so your client is more likely to pay in a timely fashion.
Receive payments globally: With automatic invoicing, you can receive payments without waiting for cash or checks. Turn tracked hours into invoiced hours with a few clicks. Advanced software offers payment options like PayPal, ACH transfers, and debit or credit cards, along with the capability of delivering invoices in multiple currencies.
What can you do to ensure you are creating and sending invoices to get paid in a timely fashion? You want to ensure that your clients know what they need to do when they receive your invoice regarding where and how to send payments. Several software programs help streamline this process by sending clients directly to bank account or a payment portal for immediate payment. (More of that in detail later.)
So what invoicing challenges could lead to delayed payments?
- Poorly formatted invoices without detailed descriptions of the work you have completed can leave your clients confused and make your bookkeeping process very challenging. It’s better to over-communicate in your invoice rather than leave out critical information. Poor documentation can leave a bad impression, and, in worst-case scenarios, may even result in loss of a client.
- Your contact for the project may not be the same person who handles billing. Know where to send the invoices. Be sure you’re sending your invoice to the right person to avoid delays in payment.
- Clients who have to spend a large amount of time or go through multiple steps to make payments will take longer to pay your invoice. Make it easy for your clients to pay. Invoicing software usually employs modern technology that helps accurately track your invoices. Encourage your clients sign up for an app, if available, so they can quickly and easily pay invoices. If you don’t have an app available or your clients don’t want to use an app, PayPal has invoicing options that allow clients to pay through a PayPal.me link even if they do not have a PayPal account.
Pros and Cons of Different Invoicing Software
Now that you understand the benefits of automating the invoicing process, here’s a comparison of some of the top invoicing software options currently available (in no particular order).
FreshBooks has the best invoicing tool, features and accounting services that include a double-entry accounting system and the ability to add an accountant as a team member. If you are looking to facilitate communication with both your clients and your accountant, FreshBooks is for you.
$15 per month for up to 5 billable clients, rising to $25 for 50 billable clients and an accounting feature, then $50 per month for unlimited clients and additional customized features. Packages are available as alternatives to these fixed rates.
- Seamless integration with other software programs like e-commerce, inventory, and payroll software.
- Optimized versions of standard features like automated payment reminders, adding discounts and taxes, and updates when invoices are received or paid.
- Accounting and bookkeeping features.
There are no free options on FreshBooks, and additional costs are levied for adding team members.
Zoho Invoice has a host of cutting-edge features and is very user-friendly. Track the number of hours or tasks on several projects using an app or online. Once the work is complete, send customized invoices to clients with automated email reminders when the invoices are due.
Zoho Invoice is free for up to 1 user and 5 clients, $9 per month for 1 user and 50 clients, $19 per month for up to 3 users and 500 clients, and $29 per month for 10 users and unlimited clients.
- Access a password-protected portal and check payment history, estimates, and receipts.
- Log expenses, create estimates, and track tasks and working hours. These parameters can be automatically converted and added to invoices.
- Utilize almost all features on the free and low-cost versions, with the capability of integrating with Twilio and creation of a customized domain with the full-price version.
- Even though Zoho Invoice integrates with several software programs through Zapier, it offers native integrations only with Zoho Books, Zoho CRM, and many other Zoho apps. If you use CRM and accounting software, it’s advisable to use the complete Zoho suite.
Hiveage stands out for its user-friendly features. If you are overwhelmed by what most invoice software and programs have to offer and all you need to do is send invoices and receive payments, Hiveage could be the right fit for you. Create one-time and recurring invoices through an easy-to-navigate dashboard. All versions allow you to use time, expense, and mileage tracking capabilities. The software also integrates seamlessly with accounting and project management software and CRM through Zapier.
The free version includes unlimited invoices for up to 5 clients, $16 per month for up to 50 clients, and $25 per month for up to 250 clients and 5 team members. For $42 per month, you get the enterprise edition that supports online payments for up to 1,000 clients and 10 team members.
- The free version can be used to serve up to five clients, perfect for a freelancer with a few regular clients.
- Supports several payment gateways, and users have the option to accept partial payments.
- One of the simplest automated billing and invoicing software systems available to freelancers.
- For freelancers who have strong business growth and need features that are not directly related to invoicing, including accounting and payroll processing, Hiveage does not offer software solutions.
With Harvest, members of a project team can track their hours and expenses in detail. Project managers can use apps to determine budgets. They can also track expenses and hours to evaluate the efficiency of team members. The invoice and payment collection tools of Harvest are easy to monitor and have advanced features like automated email reminders to clients.
Harvest is free for one user with two active projects and charges a nominal $12 per month for unlimited users and projects.
- Optimized time-tracking features as well as integration with several project management tools like Google Calendar, Slack, Asana, and Trello.
- The capability of uploading receipts and tracking payments along with expense-tracking features.
- Additional team members can be brought aboard by project managers, allowing members to track their own time and expenses within the software.
- Invoices are not very customizable. Harvest offers only one invoice template and no logo for free users.
- Pricing plans are limited, and all but the smallest businesses have to pay $12 per month.
If you take all the free billing and invoicing software into account, Ninja stands out by offering a larger number of clients than its competitors. All the critical features of automated free invoicing software are inherent in Invoice Ninja. These include asking clients to pay an upfront deposit, time tracking integration, and the possibility of adding taxes and discounts to invoices. The paid version has other useful features, including bulk invoicing, but the large number of features available in the free edition means that most freelancers would have no need to upgrade.
Free plan. For more features, you can choose the Pro plan at $10 per month or the Enterprise plan, which ranges from $14 to $44 per month based on the number of users.
- Unlimited quotes and invoices for up to 100 clients
- Create quotes and track time. Both can be converted into invoices.
- Seamless integration with over 40 payment gateways. These include credit cards and payments in multiple currencies and cryptocurrency.
- Invoice Ninja cannot seamlessly integrate with other bookkeeping and accounting software like QuickBooks or Xero. Zapier can be used, but you’ll have to set up the integrations.
Attributes of the Best Invoicing Software
What attributes should you look for when deciding on the best invoicing software for your business?
- Scalability: Think of the future and not just your present needs. Most software prices depend on the number of clients you have; hence, as your business grows, you could see increased costs. Choose software that will support your growth estimates over the next year without requiring you to move to a higher plan.
- User-friendly: Many invoicing software companies offer customers free trials. Take advantage of this opportunity to learn about the features you will need. If your business crosses international borders, choose payment gateways that cater to multiple currencies to take care of your overseas clients. Test the software from the client’s side as well, perhaps with one or two regular clients who can provide feedback.
- Integration with existing software: If you are currently using accounting or other software for your business, look for an invoicing option that is compatible. Invoicing software often integrates with other systems through Zapier, an intermediary software that is set up by users. Test the integrations with your current systems before settling on an invoicing software option.
- Costs: The free versions of invoicing software programs can be misleading. Steady business growth can quickly move you to higher-priced plans. More importantly, some advanced features can only be added by paying higher fees.
Invoicing software allows freelancers to track and monitor projects and quickly and accurately create and send invoices based on completed work, as well as track payments and send out automated reminders. The best billing and invoicing software will help you manage your business processes from beginning to end, from creating estimates for new projects to tracking hours worked to collecting payments.