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The Umbrex Guide to Setting Up Your Own Consulting Practice90 Videos
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Create an invoice tracking system. Now, I did not do this for a number of years, and if you are expecting to only be billing one client at a time and sending one monthly invoice, you may not need to do this because it’s not that hard to track in your brain if you’ve been paid for the previous month or not. You’ll know it in your checking account.
However, if you are going to be billing multiple clients for multiple projects, I recommend that you set up an invoice tracking system. Accounting software may be good enough for this purpose, but I’ve found it’s been useful to set up a spreadsheet with these fields. So, we’ll put in there the name of the client, the charge code for the project, the name of the project, and then we have a column that says the date that we sent the invoice, the amount of the invoice, and the date the payment was received.
Now, if you are expecting to always receive the amount that you invoice for, you don’t need this next column. The next column could be the amount received. I’ve dealt with one country where, even though I’m an independent professional, that country requires taxes to be withheld for that country’s federal government. So you might receive less than you’ve invoiced. If you’re in that situation, have a column for amount received.
If you are dealing with any subcontractors, then you’d want to have, the subcontractor’s name related to that invoice and how much you owe the subcontractor for professional fees, how much you owe the subcontractor for expenses, how much you owe the subcontractor in total.
The reason to break out expenses and professional fees is that when you’re reporting on the 1099 for that subcontractor, you may not include any expenses that you reimbursed. Then a column for date that I paid that subcontractor, and the method that I paid that subcontractor.
If you have all of those columns, it makes tracking invoices a lot easier. And depending on how much volume you’re doing, you can go through that periodically and look at the date received column. And also, you go down on the date that you paid the subcontractor to make sure that you’ve paid all your subcontractors promptly and on time.
So I recommend using a system and in the show notes, we include a sample spreadsheet that you can use for this purpose.
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