Invoices are an invaluable tool for any business, and as long as clients can keep up with the agreed upon invoicing terms, businesses can move forward with less friction. The unfortunate reality is that most businesses tend to anticipate late invoice payment with 79% having to chase down payments every billing cycle. While most late payments can spawn from errors on the client’s side, others can result from how often you bill your clients.
When deciding about how often to bill clients, it’s a toss-up between monthly and project-based invoicing. There is no standard script as to how frequent you should bill clients, but your decision will affect how early clients can make payments. Making the right decision is essential for developing a healthy business-to-client relationship.
Here are four factors to look into to decide on the best frequency for billing clients:
The Number of Clients Your business Has
The diversity of your client base will typically affect how often you have to invoice your clients. If you have many clients, dealing with the invoices on a monthly or bi-monthly basis will help you evade a lot of bottlenecks. In case you choose to invoice them weekly, you will probably spend a significant part of your time tracking the invoices and bookkeeping.
This will eat into the creative time that you would have used in fulfilling the work that gets you paid. In case clients have issues with the details on your invoice, it will lead to more time spent sorting out these issues, according to Freshbooks.com. With a monthly invoicing system, you can push all these issues to the end of the month and focus more on delivering quality.
The Volume of Work
In case you work on multiple large projects with a specific client, it might be wise to bill them often to avoid having to wait for an entire month. The smaller the invoiced amounts, the easier it will be for the client to offset the payments. For sizeable projects that could take more time to deliver, asking for an upfront fee is the right move.
Upfront payments will at least give you some peace of mind knowing that you already have part of the amount even if the client runs late on making the rest of the payment. Alternatively, you can bill the client halfway through less sizeable projects. This will act as a cushion for the client, instead of being hit with a lump sum amount once the project ends.
Consider How Soon You Need Funds
Every business has bills to pay, which range from rent to utility bills. While you might want to give clients some flexibility in terms of the billing cycle, your bills might say otherwise. Think about how invoicing on monthly vs. on a weekly basis will affect your ability to pay your bills.
Bill your clients accordingly, but avoid looking too desperate. If you’re still in the developing stage of your business, you can change the billing cycle once you get more clients or you build on your workload. As an incentive, offer a discount to clients that pay early.
Type of Client
The type of clients you have can also affect the frequency at which you can bill payments. Some companies only offset their bills once the board members or managers approve the payments, which can be once per month. Others will require you to contact a different individual for payments. In a nutshell, take some time to determine the type of clients you have before deciding on the best invoicing frequency.
There is no standard answer to how frequently you need to bill clients. It should all trickle down to your satisfaction and that of your client. Consider the above factors to determine the most favorable time for billing your clients to avoid late payments.