The Complete Guide to Invoicing and Payments for Freelancers

It’s hard not to love being a freelancer. You choose your clients and projects, set your own hours, and get to focus on your passion. On top of that, freelancing (usually) means you can work from anywhere and enjoy better work-life balance.

It’s not all roses, rainbows and unicorns, though. Being your own boss also means you’re responsible for all those “business-y” tasks like invoicing and payments — tasks that, if neglected, mean you don’t get paid on time. Ugh.

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But while creating invoices and managing payments isn’t exactly the most glamorous part of being a freelancer, you can do a lot to make it easier and faster.

Use this guide to improve your invoicing and payments processes so it’s easier — and you get paid on time!

Use this guide to improve invoicing and payments processes so it’s easier and you get paid on time! Click To Tweet

Invoicing for freelancers

If you’re a freelancer, chances are these two things are true:

  • You’re not super thrilled about creating invoices
  • You need to create invoices to get paid

It’s not a great situation. Because invoicing can be boring and time-consuming, freelancers often put it off or do it sloppily. Neither outcome is good — especially if you want to get paid on time.

Follow these simple tips and tricks to invoice better, faster, and more accurately:

1. Invoice early

Delayed invoicing can negatively affect your cash flow and even put your business at risk. So it’s important that you consistently deliver invoices on time.

If you want to get paid on time, do yourself a favor and invoice as quickly as possible. For one-off projects, this means sending an invoice as soon as the work is delivered to the client. For long-term clients, follow a schedule and invoice weekly or monthly — whatever makes the most sense for your business.

2. Set automatic reminders

One of the easiest ways to make sure you send out invoices on time is to set up simple, automated reminders. Set up reminders where it makes the most sense for you and your business. If you use a project management tool like Asana, Trello, or Teamwork, add a specific invoicing task at the end of each project. If you work with the same client(s) month to month, be sure to set a recurring reminder, too.

3. Use time-tracking software

Of course, you can’t invoice quickly if you’re not tracking time spent on projects accurately. Rather than spending hours each month manually tracking your time and haphazardly compiling your invoices, use time-tracking software to do this work automatically. Not only will time-tracking software eliminate potentially costly (and embarrassing) errors; it will also free up more time for actual, profitable work… which means more money in your pocket.

Check out our complete guides to our favorite time-tracking apps for iOS, Android, Mac and Windows:

4. Pick the right invoicing tool

In 2017, Microsoft Word is hardly the best or most efficient way to create invoices. For freelancers interested in maximizing efficiency, several free and premium invoicing tools are available.

Here are just a few of our favorites:

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PayPal is the biggest name in the business and makes invoicing super easy for freelancers. Create an invoice using one of PayPal’s easy-to-use templates, email it to your client, and voila! Invoices are mobile optimized, and payments can be processed on any device. Creating invoices is free for freelancers, though PayPal does charge a processing fee of 2.9% + $0.30 per transaction.

Marketed specifically at small businesses and freelancers, Invoicely offers simple invoicing alongside a number of other accounting solutions. The free plan includes unlimited invoices, although payment must be processed via PayPal. Upgrade to a paid plan (starting at $9.99 per month) and process payments via multiple payment gateways, customize your branding, and even create and send estimates. Of course, as with any invoicing “middle-man” service, you’ll also be responsible for any transaction fees charged by your payment gateway (e.g. PayPal, Stripe, Authorize.net).

 

Zoho Invoice allows freelancers to create and send professional invoices, accept credit card payments, and even automate payment reminders all within a single, easy-to-use platform. A variety of customizable templates are available to choose from, and optional automation makes delivering payment reminders and thank-you’s simple. Prefer to send invoices by ol’ fashioned snail mail? No problem — Zoho will even print your invoices, seal them in envelopes, and deliver directly to your client’s door. Like some of its competitors, Zoho also allows you to track time and expenses.

A free plan allows you to invoice up to five clients, while paid plans (starting at $7 per month) gives you access to more.

Wave promises not to “overcomplicate” invoicing, and gives freelancers everything they need to create beautiful, customized invoices and automate the process with recurring invoices and payment reminders. Integrated tracking also alerts you when an invoice has been viewed by the client. Wave’s invoicing software is free, and allows you to send unlimited invoices with an industry-standard 2.9% + $0.30 processing fee on credit card payments.

 

A more robust solution, Hiveage offers easy online invoicing in addition to a variety of other tools for freelancers and small businesses. A Starter plan ($15/mo when paid annually) allows you to create and send unlimited, customizable invoices, automate payment reminders, and track invoice status. All plans include access to Hiveage’s time, expense, and mileage-tracking solutions, as well.

 


Harvest allows freelancers to track time and automatically generates invoices from user timesheets (you can also create invoices manually for more control). Harvest integrates with Stripe and PayPal for processing payments, as well as QuickBooks Online and Xero for easy accounting. Harvest’s free plan allows for one user and two projects, while a paid plan (starting at $12 per month) is required for unlimited projects.

 

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Hubstaff offers all-in-one time-tracking software that automatically generates invoices based on timesheets (you can also create invoices manually). The tool tracks time against projects, and invoices are generated automatically based on activities, taxes, billable rates, and even optional discounts. Send invoices via HTML, PDF, or automatically via email, and see at-a-glance when invoices are viewed, paid, or overdue with Hubstaff’s powerful tracking features. Hubstaff’s Premium plan includes invoicing plus all other features for just $9 per month (try it free for 14 days).

FreshBooks offers a nuts-to-bolts accounting solution for freelancers, including powerful tools for online invoicing. Create customized invoices with FreshBooks’ professional templates, accept credit card payments, and set up automated payment reminders and thank-you’s within the software’s intuitive interface. FreshBook also allows you to accept deposits on invoices. FreshBooks is a bit pricier than other invoicing solutions, with the Lite plan (which allows you to bill five active clients) starting at $15 per month.

Time-tracking software from Freelancy allows freelancers to create invoices from timesheets automatically and send to clients via PDF or email. Payments are processed via PayPal at the company’s standard fee of 2.9% + $0.30 per transaction. As opposed to other solutions, Freelancy is available for unlimited use for a one-time fee of $29.90 per user following a free 14-day trial.

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Managing payments for freelancers

Of course generating invoices is only half the battle; you also need a foolproof process for accepting payments. Remember, the easier you make it for the client, the faster you’ll get paid! Follow these best practices for accepting payments:

1. Escrow

Starting a big project, or working with a new client? Consider requiring an escrow payment upfront. With escrow, your client will deposit an amount into an escrow account (managed by an independent third party), which is released upon completion of the project or agreed-upon milestones.

A variety of companies offer online escrow services, including:

Fees for escrow services can get pretty pricey, so you might consider reserving this option for high-value contracts or including the fee in your proposal.

2. Payment plans

For large contracts or clients with special circumstances, consider offering a payment plan to make things easier for your client. If you have a client that is especially (or regularly) delinquent in paying, offering a payment plan may also be worthwhile.

You can do this a couple of different ways. The easiest (but less efficient) way is to simply create multiple invoices for the individual payments with different due dates. Alternatively, you can save yourself some time and hassle using an automated solution like Partially, which allows you to create payment plans with customizable fees (either a percentage or flat fees), down payments, terms, and payment frequency. The service integrates with Stripe for payment processing and charges 5% plus $0.30 per transaction (this includes Stripe’s fees).

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With a payment plan, you obviously won’t get all your money upfront, but you can make up for that (and help cover the cost of automation and payment processing) by charging clients an agreed-upon percentage or flat fee.

3. Late fees

Incentivize timely payment by including a late fee in your contracts. Whether you charge a percentage or a flat fee is up to you, though a 15 percent surcharge is pretty standard. If you do decide to charge a late fee, just be sure it’s not a surprise by laying out your policy in advance. Reference your late fee policy in your proposals, contracts, and on invoices. Also make sure that every invoice you send has a specific due date.

4. Dunning process

Of course, part of making sure you’re paid on time (or at least as close to it as possible) is communicating clearly with your clients. A Dunning process is “the process for methodically communicating with customers to ensure the collection of accounts receivable.” Save yourself time, headaches, and cash flow problems by implementing a consistent Dunning process for your freelance business. The more automated you can make this process, the better.

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DO:

  • Automate (or at least schedule) payment reminders — you can often set these up using your online invoicing service.
  • Pick up the phone — don’t rely on emails to do the job alone; sometimes a quick phone call is the kick in the pants a client needs. Set a recurring task or calendar reminder to knock these out all at once on a regular basis.

DON’T:

  • Think you’re being rude — you did the work; you deserve to be paid! Don’t be an ass, but be firm and lay out expectations clearly.
  • Threaten or harass your clients — it’s not just bad business; it’s also illegal.

5. Offer multiple payment options

In a perfect, less complicated world, all clients would pay the exact same way. Unfortunately, life as a freelancer isn’t quite so simple, and you need to meet clients where they’re at as best you can. Get paid more promptly by offering clients a variety of payment options designed to fit their business.

 

There are nearly limitless options for accepting payments online, but here are a few of our favorites:

Pretty much the gold standard for freelancer payments, PayPal makes it super simple for freelancers and clients alike. Using just your email address, clients can send you payments directly via PayPal’s easy-to-use interface. You can also create and send invoices with PayPal (for more on that, check out the previous section).

PayPal is a preferred payment method for many clients based on its ease-of-use, and the service allows businesses to pay via credit card, bank transfer, PayPal wallet, PayPal credit line, and more.

PayPal charges freelancers a standard fee when a client makes a payment to a PayPal Business account. However, there is no fee when clients pay using the “friends and family” payment option.

>>BONUS: PayPal also integrates with popular time-tracking software like Hubstaff, automating payments based on freelancer timesheets for maximum efficiency, accountability and peace-of-mind.

 

Skrill is very similar to PayPal, and allows instant payments via credit card or bank transfer. While Skrill services more countries than PayPal, transaction fees are a little more complicated.

 

Payoneer is preferred by many clients managing multiple freelancers (the site’s mass payments feature can accommodate 5-200 beneficiaries) or cross-border transactions. Using Payoneer’s easy-to-use interface, businesses can make freelancer payments via credit card, bank transfer, online wallets or international checks.

Unlike wire transfers (also frequently used for international payments), payments made to freelancers via Payoneer typically complete fast — sometimes within just two hours.

Payoneer is also the payment processing service used by Upwork. Speaking of which…

 

Upwork (formerly known as oDesk) is the world’s largest marketplace connecting freelancers and clients. All invoices and payments are managed directly through the site, which is super convenient, but can also be pretty costly for freelancers.

With Upwork, freelancers are charged a service fee based on their lifetime billings with a particular client. And watch out — it can get pretty expensive. Here’s Upwork’s sliding scale for freelancer service fees:

  • 20% for the first $500 you bill your client across all contracts with them
  • 10% for total billings with your client between $500.01 and $10,000
  • 5% for total billings with your client that exceed $10,000

Ouch.

The upside? Upwork’s in-house payments system makes it easy for both freelancers and clients, offering options for payment via PayPal, direct deposit, and wire transfer. The site also offers escrow payments for milestones (more on the advantages of escrow in a minute).

 

An alternative to Upwork, Freelancer also offers multiple options for clients to pay freelancers, including credit card, bank account, PayPal, and Skrill.

Freelancer works a bit differently from Upwork, however, as service fees are charged to either the client or freelancer based on the type of project (hourly or fixed) and circumstances. These fees vary wildly, so be sure to check them out before going this route.

Once a client makes a payment, freelancers using Freelancer.com can make a fee-free withdrawal via bank transfer, PayPal, Skrill, or Freelancer debit card. Wire transfers are also available for a fee.

 

Authorize.Net is popular among small to medium-sized businesses and allows you to accept a variety of client payment methods, including credit card, PayPal, virtual wallets like Apple Pay, and more. While Authorize.Net’s service fee is on par with PayPal (2.9% plus $0.30 per transaction), a $49 setup fee and monthly gateway costs makes this a slightly more expensive option, although you do receive added benefits like increased security and fraud protection.

 

Wire Transfer

Wire transfers are an old school but reliable option for freelancer payments. A cash wire transfer can be made directly from your client’s bank, though fees can vary and payments usually take a few days to complete.

Western Union makes it easy for freelancers to get paid almost anywhere, with more than 300,000 locations worldwide and options for direct bank transfer. MoneyGram is another popular alternative, although the service has fewer locations for on-site payment and lower transaction limits.

Despite their convenience and reliability, wire transfers do have significant drawbacks. Fees can get pricey (especially for small, one-time transactions), and payments can take significantly longer than other methods.

Popular services like Upwork and Freelancer.com also allow for wire transfers. Just keep in mind that service fees charged by these sites can get pretty expensive.

A number of popular time-tracking solutions make managing payments easy for freelancers and clients alike. Time trackers like Hubstaff integrate with leading payment services like PayPalPayoneer, and Bitwage, seamlessly linking automated payments with timesheets.
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Tracking earnings for your freelance business

Managing invoices and payments is just one half of the equation, however, and keeping your freelance finances in shape means tracking your earnings. It’s about more than just getting paid. Accurate records make things like budgeting, forecasting, and filing taxes (you know, kinda important stuff) way easier.

One of the easiest ways to keep accurate payment records is to use one of the invoicing, payment or time-tracking apps mentioned above. Many of these tools allow you to view or even export earnings reports, and some like Hubstaff even integrate directly with accounting software like FreshBooks and QuickBooks Online.

At the very least, make sure you’re keeping track of all outstanding invoices and completed payments somewhere. If you’re not ready to shell out for professional software, consider using a free tool like Google Sheets to track your freelance business’ earnings.

 

Invoicing and payments for freelancers

Being your own boss is awesome, but as a freelancer, it also means managing invoices and payments. If you lack a process for either, it can make or break your freelance business. From creating invoices and automating reminders, to offering payment plans and tracking your earnings, follow the steps outlined above to make invoicing and payments easy for you and your clients — and help ensure you actually get paid on time!

Are you using any of these tools or techniques to run your own freelance business? What’s working (or not working) for you? Share your experience in the comments!