What's the best way to Invoice? 4

[RichGeoffroy]

What's the best way to invoice --- up front and in full, if you think you can get away with it. One guy I knew used to invoice the client 50% as soon as the project came in, but he was able to get away with it. Generally your client will want to be billed after everything is completed --- that may be great for him … but not for you.

You’ll find some clients that will want you to bill them “in-full” toward the end of the year. Generally, these are situations where they don’t want to “lose” funds that have been budgeted to their department. It also helps them to get more funds allocated for the new budget, or at least justify the same amount for the coming year. Feel free to do whatever your client asks, just remember that this windfall is not profit --- you’re going to have to deliver those services at some time.

I have always taken a middle road. Clients are billed routinely every month for the charges that are incurred during that period. It seems more than fair, inasmuch as I’m on the hook for the first 30 days, then I give them 30 days to pay, before you know it it’s another 15-30 days before you notice that they are late and you start to pursue payment from their Accounts Payable department. So, with a good client, you could be holding the bag for 75 to 90 days or longer on an invoice. In the meantime, other charges have been building.

If you can bill on a bi-weekly basis that’s great, but you may find that you’re spending a lot of your time on invoicing and chasing down receivables rather then on client time --- it’s a double-edged sword. The key to invoicing is to charge your client appropriately, get your payment promptly, and recognize problems early --- all this and don’t spend a lot of time doing it. Your business is engineering --- not collections.




Rich Geoffroy
Polymer Services Group
POLYSERV@aol.com

 

[jmw]

If you are a small company dealing with big companies, you may have no choice but to accept their payment terms.

Some companies automatically deduct a discount for prompt payment.

Some just as automatically defer payment beyond the agreed period. There is usually a national index of the actual over-run between due date and payment date.
Some may not pay at all.

All must be allowed for in your cash flow forcast; bad debt and late payments are a fact of life.

In other words, anticipate and manage the problem realistically.



JMW

http://www.viscoanalyser.com

Eng-Tips: Pro bono publico, by engineers, for engineers.

Please see FAQ731-376 for tips on how to make the best use of Eng-Tips Fora.

 

[kmacsys]

My suggestion is to "know your clients". I run a small 3 person CADD services firm. We invoice certain clients monthly, other "lump sum" projects we invoice at the end.

YOU MUST MANAGE YOUR CASH FLOW. As much as we are engineers, CADD professionals, etc, we must run our business as a business, despite one's engineering expertise. If you don't want to run your business, then go to work for someone else and develop your engineering skills there.

 

[ml13]

Another tip:
Know when you client invoices theirs (if it goes up the food chain, as mine do). If you miss their cycle, you will be delayed several days to several weeks just because you are out of phase with them.

 

[amorrison]

A bit OT . . .
I took a "start your own business course" last year and by far the most important think I learned was to "hire" a partner who is COMPLETELY OPPOSITE than you in mindset.
Engineers create what has never been - that's their job.
"Creative accounting" is another word for . . . .

IMHO
Totally stick to engineering
and let the accountants do the billing (to some agreed standard).