Invoicing: Turning Commitments into a Cash Stream

Daniel Emberley, May 2004

For the American Institute of Architects, Washington, D.C. Chapter 

Invoices are the tool needed to keep us solvent, but honestly, we’d all rather be designing.  Invoicing early and often is an early warning system for client issues and keeps cash flowing in.  Here are a few tips to make invoicing easy, accurate, and quick. 

One:  Set up your information so invoicing is simple.   

Collect contracts and commitments that detail billing rates, especially concessions for specific clients, in files alphabetically by client name.  This will make it easy to look up the specifics of what agreements you have made.  

Collect documentation of reimbursables in a “billable” folder.  Receipts for blueprinting, invoices for subcontractors, and scrawled notes for courier charges should be socked away in the folder as charges are initiated or received.  When multiple charges come in on your charge card or a general invoice, annotate the specific amounts on the slips you put in the folder.   

Two:  Set up a bi-weekly schedule. 

Clients hate paying bills.  Don’t you?  You can expect even your best clients to delay or not pay your final invoice at all.  It’s much easier to collect smaller sums, issued every two weeks, than it is to get a client to write a large check after a project is complete.  Giving them an invoice every two weeks will get them used to paying you, to the idea that your time has a cost, and reinforce their responsibility for reimbursable items.  Invoice while a project is still a gleam in the client’s eye and before they have been burned by permit delays and contractor issues.  How promptly they pay these charges is an excellent warning system about payment of additional hours later in the project. 

Even clients with a prompt payment history should receive bi-weekly statements, demonstrating that you appreciate their payment.  Statements share your version of their account history, pre-empting confusion and disagreements later. 

Three:  Prepare invoices and statements. 

You probably have two types of items to invoice: progress payments, against items agreed to in the client contract, and reimbursables, items such as courier fees that are client related, but not predictable when you signed the contract.  Additional hours are generally considered reimbursables.  The AIA standard contracts cover billing of reimbursable items.  

Review your client list, and determine what contracted items have been completed in the previous two weeks.  It helps to have a hardcopy of the client list in hand as you review the client files with the signed contracts.  Mark up the hardcopy for the percentages/charges to be billed. 

Sort your file of current reimbursable items alphabetically by client.   

If you have an accounting package such as Quicken or QuickBooks, you can generate invoices using their tools.  If you have a small number of clients, it is not difficult to create invoices in Word or Excel.  Each invoice should include:

A unique invoice number

Your name, address, phone, and contact person

Client’s name and address

Project name

Date of invoice

Section for progress items, keyed to the original contract

Section for reimbursable items

Total of progress and reimbursable items

Statement of payment terms (usually, “Payment due immediately upon receipt.”). 

Do not include past payment history on the invoice: it’s easier to track that on a separate statement.  Statements can be generated from your accounting package, or from a list of invoices/payments tracked in an Excel file.  Keep invoices unique to a billing period.  Use a statement to report current due, past due, and to generate late fees on invoices that are over the contractual payment period.  Clients can be given credits on the statement without clouding the record of your investment on a project. 

Update your statement files to include the current invoice(s).  Create the statements. 

Print two copies of each invoice and statement. 

Four:  Send and store. 

Send one copy of each statement and any invoices to the client, by either e-mail or USPS.  Hardcopy documents going out via the Post Office seems incredibly retro, but is the best way to create a paper trail.  Often, your client and the person in charge of their checkbook are different people, who may not be in full communication.  The hardcopy could be the first your client’s accounting staff will have heard about a project.  Open communication with the people who write you checks is a critical step toward financial solvency; regular invoicing will create that situation. 

Collate and staple the second copy of the invoices and statements with the reimbursable documents, and store in each client file.  I highly recommend this even for firms that disseminate invoices electronically: it is amazing how a paper trail can clear up confusion when a client cannot find a past due invoice. 

Five:  Reap the rewards. 

As payments come from clients, record in your accounting system, and deposit immediately.  Keep proof of payment with each client’s file.  Best is to attach the check stub to the appropriate invoice, but at minimum, a copy of the check or the stub in the file should document payment. 

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Daniel Emberley is the founder of Emberley Streamlined Office Systems, providing office management services by the hour to growing firms.  He can be contacted at EmberleySOS@juno.com.