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The Ultimate Guide to Invoicing like a Pro

Everything you need to know about creating and sending an invoice

Whether you’re a contractor, freelancer, sole trader, or you own and operate your own business, sending an invoice is the most important part of the work. Your only guaranteed means of getting paid is by creating and sending an invoice yourself, unless your clients pay you directly via credit card or through buyer-created invoices.

And unfortunately, unlike in a permanent job, invoicing as a sole trader won’t just start happening ‘automatically’.

Another reason why invoicing is so critical to your work is that the entire process of invoicing is a direct reflection of you and how you work – both during and after your work has been completed.

In other words, if you send a shabby invoice, your work will have a layer of unprofessionalism to it – no matter how good the service is that you provided. If you set a due date for the following day, your client might discredit your brilliant work because of how you handle your business admin. And if you’re not incredibly transparent and upfront about your fees, even inquiring about the ideal billing cycle before you start the job, you might be seen as inexperienced or even untrustworthy.

Contents 

In this invoicing guide we’ll address all of the important aspects to creating, sending, and following up on an invoice:

 

Why Are Invoices So Important?

Your invoices say a lot about you.

Imagine for a moment that you need to get some new carpet installed in the lounge of your house. You search online for a vetted tradie, maybe look for some reviews and take the time to make a calculated buyer’s decision. You hire someone who looks good, but it’s hard to see their track record over past jobs. “Oh well,” you think. “They look like they do good work.”

The tradie shows up and it’s true: they do really good work. They lay new carpet in the house in record time. But then you get slapped with an invoice the very next day: they’re charging you double what they had originally quoted, plus a convenience fee, a call-out fee, and to top it all off, they send you a digital invoice that looks to have been slathered with white-out and filled in with crudely hand-written values.

Will you hire this person again? Definitely not.

Will you recommend them to someone else? Well, maybe to someone you disliked.

No matter how good your work, how efficient you produce a final product, you will have a hard time getting consistent work if your post-project business is conducted in a hasty and unprofessional way.

Put simply, the invoices you send (the way they look, when you send them, the payment options you offer the client) directly reflect the quality of your work and your working style.

In order to get invoicing done right, in a way that will maintain your relationships with current and future clients, follow these simple steps:

 

How to Craft an Effective Invoice

There’s a lot to keep track of here, but we’ll break down the elements that make a good invoice into three sections: before you invoice, the invoice itself, and what to do after you send an invoice.

 

Before You Invoice

 

Set Clear Expectations 

Before you start doing any work for a client, make sure they are aware of your rates (hourly/daily) and any additional fees you might charge (eg, ‘extra editing time’ or ‘call-out fees’). In some cases, a client will be happy to put a cap on the hours you complete for them, rather than pay for the individual tasks you complete. If you’re upfront about your pricing and the hours it will take to complete a task, it’s very likely that you’ll be able to charge those additional fees, where applicable.

Be Transparent

If you require some upfront payment, this is also the time to disclose that information. Say you need 50% of the invoice paid ahead of time, in order to pay models for a photo shoot for a client: letting the client know about this ahead of time (while justifying the need for an upfront payment) is crucial in keeping your integrity and maintaining a transparent relationship with a client.

This is also an important moment in the process to determine who exactly you should be sending the invoice to. For work done at a large organisation, you should have on-file the email address of someone that will handle payroll. If you don’t have this information, it’s super important you find the contact details of someone at the organisation (even if you list a manager).

Specify Dates

There are a couple of important dates you’ll need to discuss with a client before you start working for them, including:

  • The dates you’re contracted to complete the work for your client
  • The date the invoice will be due. It’s important here to set a reasonable due date (see below for more info)
  • The date you sent the invoice

When is a reasonable due date for an invoice?

Don’t set the invoice due date for the day after you send an invoice (unless this has been previously discussed). Try and set a date that’s far enough in the future where the client has flexibility in when they will pay, but close enough in time where they won’t forget to pay. The standard practice is to set a due date that is 21 days from the date of the invoice, giving your client 3 weeks to pay. What you set as an invoice due date (even a difference of a day or two) can actually have a very significant impact on how quickly your client will pay.

 

Sending an Invoice

Once you’ve established timeframes for work and payment, and once the work has been completed, it’s time to get paid for real.

What do you need to include on your invoice? And what personal information do you need to give?

What is a reasonable invoice due date? Do you have timesheet information that will be incorporated into the invoice?

Will you list a logo and a trading name? Will you include multiple payment options? How will you ensure that you’re reimbursed for the necessary purchases you’ve made?

There are so many components to a good invoice, all of which we’ll go over in more detail now.

What to Include

Tax Invoice vs. Invoice? These are two very different terms, and the distinction is straightforward: a ‘tax invoice’ is a document that includes an amount of tax owing as part of that particular invoice, while an ‘invoice’ is the total amount owed from the client to the payee, where there is no tax component.

If you’re registered for GST, you must add your GST number to all invoices you send. This will ensure that you’re collecting GST on your earnings, which you’ll then have to declare on a GST return to IRD on a regular basis (either bi- or six-monthly). Should you be registered for GST? If you will be earning over $60,000 in a year, you must register for GST.

If you’re GST-registered, you must include the phrase ‘tax invoice’ on your invoice.

If applicable, add a trading name and logo. Despite what you might hear out there, you actually don’t need to be registered as a business in order to use a trading name, logo or even a unique email address on your invoices. The need to register as a business is a common misconception for contractors and freelancers who are just starting out, and will only cause you to incur more burden along the way (ie, filing taxes for both you and your registered business). Having a trading name, logo, and all of the other nice things that come with your work as a sole trader are completely separate from the need to register as a business.

The client’s name. You can include the organisation or business name, or a person at said organisation that you know handles payroll. This is something you will have determined in the ‘pre-invoice’ step. It’s also a good idea to include the client’s address in this step, as well as any necessary information that the client uses to track invoices (such as a purchase order number).

A description of the services you provided the client, including:

  • The quantity of that service you provided. If you used any time recording software or tools to track your hours worked, you can include a link to a timesheet right there on the invoice. This will help provide justification to your client around the number of hours you completed.
  • Unit price. How much is that rate? Are you charging daily or hourly? Do you have different rates for overtime or weekend work?
  • If registered for GST, include the total price including GST and specify the amount of GST charged on that invoice)

Payment methods and information

Clients like having the option to pay with a credit or debit card online, so if you have the choice, try and include that payment option on your invoices. Moreover, if you pay for an account through a service like Stripe or Paypal, you might want to add these as payment options on your invoices.

Important: avoid accepting cash payments at all costs. These are hard to track and are a big red flag for IRD around tax time.

Add some other details, such as any necessary invoice comments and your contact information – your client might have questions or follow-up comments.

If your client or employer will be deducting Withholding Tax on your behalf before paying you, you will need to include your IRD Number within the invoice. You’ll also need to have previously provided your client or employer with a signed IR330C form specifying the rate of tax you would like them to deduct. When creating your invoice, you should not ‘discount’ the invoice by the percentage of Withholding Tax you elect - this is not correct from an audit perspective, and can lead to significant problems when you come to file your tax return at the end of the financial year. If your client or employer asks you to add a negative ‘Withholding Tax deduction’ line to your invoices, this is not correct procedure and is an incorrect use of an invoice.

Last but certainly not least, you might want to inject some of your personal tone & voice. Here’s an opportunity to reflect your individualism and creativity through a medium that is traditionally quite dull. The main challenge here is to emphasise your brand while maintaining that air of professionalism. Do keep in mind though, aside from the crucial criteria listed above, this step is purely optional.

If all of this is too much to keep track of, Hnry provides great invoicing software that will make creating and sending an effective invoice easy (and even a little bit fun). For your reference, and for a good template, a good invoice should look something like this.

Other Important Things to Include

If you made any purchases during the course of the work, you can include these on the invoice in order to get reimbursed for them. You’ll need to have previously had these approved, along with a receipt or other form of Proof of Purchase (this could include a bank statement or e-receipt), before you add them to your invoice.

How do all of this work? When you do work for a client, there will naturally be some purchases you’ll need to make that are integral to the work you’re doing for them – expenses for which they have agreed to reimburse you in full. These expenses are not subject to tax deductions, and cannot also be raised as Business Expenses, as they are a full reimbursement for any costs you have incurred. Effectively, your client is making sure you are not out of pocket for anything purchased whilst working for them - so there are no tax reductions or tax relief applicable.

 

Invoice Etiquette: What to Do After the Invoice Has Been Sent

This step in the invoicing process is maybe the most notoriously difficult to manage. You’ve sent the invoice and now you’re waiting to be paid.

What happens if your client doesn’t pay by that due date? What should you do? How do you follow up without appearing bothersome and risking damage to your work relationship?

According to some recent data, around 60% of individuals’ invoices are overdue when they get paid. That’s a staggering statistic, especially given that many of the clients that people contract with represent rather large businesses. It’s often the case that, with these large businesses, an invoice can slip through the cracks.

So how do you get paid on time while also limiting the number of invoice follow-ups?

If you have flexible payment options listed on your invoice, you can mitigate the risk that your invoice will be paid late. Another way to go about getting paid on time is to clearly and politely communicate with your client, both before or just after the invoice is sent, your timeframe for invoice pays.

With Hnry, we automatically send a follow-up email to your clients after the invoice has been marked overdue for more than two days. This allows you to focus entirely on the work, and it lets you maintain your relationship with that client moving forward. Rather than pestering them with emails yourself, you can just let them know that your ‘payment guys’ will be doing the pestering – not you.

 

Hnry Makes Invoicing Simple and Straightforward

If all of the above makes you feel overwhelmed, you’re not alone. There’s a reason there are so many timesheet apps and templates, invoicing software solutions, and expense tools out there. But all of these solutions only actually solve a fraction of the problem: once you use software to create and send an invoice, you need another form of software to load your expenses – and there’s no one there to chase down late-paying invoices or store your payslips after the invoice has been paid. Moreover, most invoicing and accounting software hooks into your bank account and requires you to reconcile all of your own invoices yourself. This can be useful in some instances, but if you have multiple clients and several invoices coming in at once, you might find it to be a real overhead trying to reconcile these yourself.

That’s how Hnry helps. Thousands of Kiwis have outsourced their entire invoicing process to Hnry: from uploading client chargeable expenses and sending the invoice out, to getting paid and keeping track of pays – with Hnry, you can even get paid by overseas clients!

Hnry helps contractors, freelancers, consultants, sole traders, and other self-employed individuals get invoicing right every time – saving them time, hassle and money. We even chase up late-paying invoices on your behalf so you don’t have to!

But Hnry doesn’t just offer smart invoicing software. Hnry also provides easy ways for your clients to pay your invoices, through online card payments, which is included in the Hnry 1% of your self-employed income, ‘one-price-fits-all’, pricing model. Now you can easily create and send invoices, track your payslips, and get paid in a jiffy, all for a fraction of the price of other invoicing software.

And for that low price of 1% of your self-employed income, we’ll also calculate, pay and file all of your income tax – on time, every time. 

There’s no better way to get all of your invoicing needs (and much, much, more) all under one roof. Hire Hnry now to take the pain away.