The most important part of a freelancer’s invoice
Let me preface this post by making an unsurprising statement: I am not an accountant or fancy contract/invoice lawyer. So this is my subjective opinion on the most important part of a freelancer’s invoice: a statement about charging interest on overdue payments.
Why is it important to charge interest on overdue payments?
As a freelancer, you may not have a steady stream of income like in a traditional 9-5 job. You rely on the prompt payments of your clients to pay your own bills. Aside from the time frame in which to pay (30 days, 60 days, etc), charging interest on overdue payments is critical to include in your invoice. If an invoice is late, you can then issue another one for the interest rate. It gives you a bit of compensation for the time you were waiting for your payment.
How much interest should I charge?
Take a look at what others in your industry and region charge. Consult your local government agencies for business to make sure you’re doing everything above board (charging interest can actually be criminal in some places if you do it wrong). Personally, I’ve seen interest rates that range from 1.5% – 2% per month. Depending on the total of your invoice, that might not seem like much, but at least it’s something. Plus, it tends to prioritize invoices in harried Accounts Payable departments.
Things to keep in mind
For a freelancer, it can be especially frustrating to have overdue invoices, but don’t charge into it with guns blazing. Check the contract you and your client signed to ensure there’s nothing in there to preclude you charging interest on an overdue invoice. Consult an accountant or business lawyer to make sure you’re doing everything by the book, check what your rights are, and what to do next. And most of all – don’t burn any bridges. An overdue invoice doesn’t necessarily have to mean an irrevocably damaged relationship.
Further reading about charging interest on overdue invoices:
Collecting debts (Canada)
Charging interest on late payments (UK)
Late payment in commercial transactions (EU)
Category: Freelance Writing