Invoicing
Most of your clients will not pay you cash when you perform your services. Instead, they will want to receive an invoice. An invoice is a list of goods or services, usually specifying the price and terms of sale. Keeping track of payment on service invoices will be an important part of your recordkeeping system.
Invoice Types
There are two types of invoices commonly used by consulting services: itemized and nonitemized. Some of your clients will prefer one over another. An itemized invoice includes a list of what is being charged for, including services, hours of service, and a list of specific expenses that require reimbursement by the client. A nonitemized invoice is simply a short description of the service and the price. If you've agreed on a single fee for a short-term engagement, you and the client may agree on a nonitemized invoice.
Invoice management software is available in stand-alone programs or in conjunction with popular accounting packages. They are designed to automate the invoicing process and track invoices that have been sent out. Many also can accept and process credit or debit card payment for invoiced services. If your consulting service relies extensively on invoices, consider an integrated invoice management program with your accounting software.
Invoice Components
All invoices that you provide to clients for services rendered should include the following components:
Your business name
Unique invoice number (for tracking)
Client name and contact information
Invoice date
Purchase order number (if needed by the client)
Service summary
Fee calculation
Reimbursable expenses (if any)
Tax requirements (tax calculation, federal ID number, or Goods and
Service Tax calculation)
Total amount payable
Terms of payment
Where to send payment
Invoice Tracking
Invoices record the amount of money with terms that clients owe you. Payment will be received some day, so invoices are considered accounts receivable. (If someone sends you an invoice for services, it is categorized as an account payable, an account you will pay.)
It is vital to the success of your consulting business that you not only send out invoices to clients, but that you also track them. Most accounting software programs include modules to track and manage invoices. In fact, many offer an automated invoicing system to help you prepare invoices as well. You provide a service — you should be paid for it. Your invoice tracking system is the key to making sure that you have the income needed to cover expenses.
