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Customer invoices: When should you send them?

Understanding when to send an invoice is important to maintaining a healthy cash flow for your business. The timing depends largely on the nature of your business, the terms agreed upon with your customer, and the type of invoice you are using. Here are a few common scenarios:

1. Service-based businessesFor service-based businesses such as consulting firms, marketing agencies, and freelancers, invoicing often occurs after the services have been delivered. This is referred to as “invoicing in arrears.” For example, a freelance graphic designer may complete a project and then issue an invoice detailing the hours worked and the agreed-upon rate.

In some cases, service providers invoice periodically, such as monthly or quarterly, especially for ongoing services. A digital marketing agency, for instance, could send a monthly invoice to their clients for continuous SEO services.

2. Product-based businessesBusinesses that sell physical products often send an invoice at the point of sale. For instance, a retailer would issue an invoice immediately after a customer purchases items from their store.

In ecommerce, a business sends an invoice once the customer has confirmed the order, and the invoice often accompanies the shipped goods. For example, an online clothing retailer would send an invoice as soon as a customer’s order is processed, detailing the items purchased and the total cost.

3. Progress billingFor large-scale projects, such as construction or bespoke software development, businesses often use progress billing, where invoices are issued at various stages of the project. These stages could correlate to when certain milestones are met or when a specific percentage of the work is completed. For instance, a construction company might invoice after the completion of each project phase: foundation, framing, roofing, etc.

4. Recurring billingFor businesses providing subscription-based services, such as SaaS products or a magazine subscription, invoices are usually sent at regular intervals—monthly, quarterly, or annually—as per the subscription agreement.

5. Up-front paymentIn certain cases, businesses may require payment in advance, especially when there’s a significant outlay for materials or when the customer’s credit is uncertain. In this case, the invoice is sent before the business delivers the product or performs the service. For instance, a custom furniture manufacturer might require a 50% payment up front to cover material costs, and they would send the customer an invoice detailing this advance payment.

6. Retainer modelIn the retainer model, which is often used by law or public relations firms, clients pay a set amount regularly (usually monthly). The firm provides an invoice detailing how the retainer was used—for instance, how many hours worked, and on which projects—and any extra charges beyond the retainer.

In short, the timing for sending customer invoices depends greatly on your specific business model, the nature of the goods or services you provide, and the agreement with your clients. Regardless of when you send your invoices, remember to be clear on your payment terms, prompt with your invoicing, and consistent in your follow-up to ensure timely payments.