6.1 Quoting and invoicing
One of the biggest challenges when you’re just starting out is knowing how to price your products or services.
Quoting/pricing
It can be difficult to know how much to charge customers before you know what they might be willing to pay. Too much and they might take their business elsewhere, not enough and you might win or sell the work, but make insufficient income to cover your costs. Listen to what our creative freelancers advise about pricing in this short video
Transcript: Video 5
Martin (2019) recommends that you take the following into account when quoting for work:
- How long you think it will take you to complete.
- What other freelancers are charging for work (the ‘going rate’).
- How much you want the work.
- How good the client is – are they easy and pleasant to work with, and pay on time?
For example, if you really want the work, you might be prepared to reduce your rate, whereas if you know they are a difficult client, you might keep your fee a little higher.
Similarly, when pricing artwork, Cass Art (no date) recommends considering the materials you have used and the time you’ve spent. This will also help you to logically defend your prices if challenged. Also – check what similar artists are offering and how they price their work.
If you are charging for your time, you can charge by the hour, the day or the project depending on what works best for you and the client. The disadvantage of charging for the project is that if it overruns for reasons beyond your control, you won’t necessarily be able to negotiate payment for additional days worked.
Martin (2019) also recommends this useful habit: reviewing your quote or price after completing the work to see how accurate your estimation of cost was. Over time, this will allow you to more accurately cost your work.
Invoicing
If you are selling a product, it is likely that you will receive payment before despatching it to the customer. However, if you have a service-based business, clients are more likely to want the work up front and an invoice from you on completion.
HMRC (Gov.uk, no date, b) requires you to include certain details in every invoice you generate:
- a unique identification number
- your full company name, address, and contact information
- the company name and address of the customer you’re invoicing
- a clear description of what you’re charging for
- a supply date (i.e. the date the goods/services were provided)
- the date of the invoice
- a breakdown of the amount you’re charging your client
- the amount of VAT, if applicable
- the total amount owed.
If you’re a sole trader, the invoice must also include:
- your name and any business name being used
- an address where any legal documents can be delivered to you if you are using a business name.
There are other things you can do to maximise the professionalism of your invoice and the chances of the client paying it. They include:
- using an invoice template or invoicing software
- identifying the person responsible for paying/authorising your invoice, and sending it directly to them
- adding as much detail as possible about the product or service you are charging the client for – this avoids confusion and gives you something to refer back to in case of queries
- sending your invoice as soon as your work is finished
- for a large job, you could consider staggering your invoices at agreed milestones.
Now complete Activity 6.
Activity _unit8.7.1 Activity 6 Invoice templates
Spend a few minutes using your preferred search engine to look up some free invoice templates. They are all quite similar, so you’ll soon see what’s required in terms of layout, content etc.
If you struggle to find any, Microsoft [Tip: hold Ctrl and click a link to open it in a new tab. (Hide tip)] offers several options (to open the link in a new window or tab hold the Ctrl key (or Cmd on a Mac) when you click).
Discussion
Once you have an idea of the layout you like and content to include, it is relatively easy to design your own template. Excel can be a useful tool to use, but it is good practice to convert your final document to a PDF before sending it. This protects from being altered by anyone else.
Not every client will pay their invoices on time, so it’s important to have a strategy to avoid this wherever possible. Watch this short video from a business-to-business debt collection agency, sharing useful tips.
Transcript: Video 6
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Getting Unpaid Invoices Paid
Getting unpaid invoices paid is crucial for any business in the UK.
When you have provided goods or service for a client, you expect payment.
An invoice becomes overdue once you are one day over the usual 30 day payment term.
If you have not received payment within the agreed terms then this can be categorised as a late payment.
Our speciailist Business Debt Recovery team have put together some simple tips to maximise your strategies.
8 Step Action Plan for chasing overdue invoices.
It is acceptable to chase unpaid invoices – any experienced business owner will tell you that this is totally acceptable.
Most companies tend to opt for the standard 30 day terms in the UK.
Include late payment charges on your terms – this can deter customers and clients from late payment.
Legislation allows you to charge up to 8% interest plus the Bank of Engalnd base rate on late payments.
Never get stressed – easier said than done right? But stay calm.
There are many legitimate reasons why an invoice payment is late but it is usually down to forgetfulness.
Send a courtesy reminder – any initial payment reminder should be courteous and polite.
This is your customer and at this point a respectful letter or email to remind them that payment is due will do the trick.
Follow up your reminder – if your payment reminder has not had a response, then you should send another.
This should clearly outline the status of their account and the outstanding invoices due.
Get on your phone – if your polite prompts for payment have been ignored then it’s time to reach out via telephone.
Engaging your customer this way will give you immediate answers.
Main options to collect unpaid invoices.
Use a debt recovery agency – this is a growing solution for many businesses across the UK and globally.
It is important to remember that not all debt recovery services are the same.
Taking the legal route – this well trodden path is deemed as too expensive for many.
It still then needs to be enforced if payment is not made.
Then you need a debt recovery agency or suchlike for enforcement of the unpaid business CCJ.
How can we help?
Federal Management are the UK’s leading business debt recovery service.
We specialise in maximising results whilst minimising the cost for recovering unpaid invoices.
Learn more are federalmanagement.co.uk