When you invoice a client for freelance work, you’re essentially starting an open invoice. Also known as an outstanding invoice, this statement is an official request for payment in exchange for your services that has been sent to a client but has yet to be paid.
It’s important to keep track of payment requests at this stage because it allows you to manage your cash flow and ensure that payments are properly tracked. It’s best to use an invoice template for graphic design from an Invoice Ninja to make this task easier as the software does all the tedious work, letting you focus on your job knowing that your finances are taken care of.
Open Versus Overdue Invoices
Open and overdue invoices are both unpaid bills, but they’re not the same thing. Open invoices have not hit the payment due date and can still be fulfilled according to the terms of a billing contract. An overdue or past due invoice, on the other hand, has passed its deadline and may incur penalties on the side of the client.
How Do Open Invoices Work?
All invoices start as open invoices. The way it works is that a service provider such as yourself will send an invoice to a client. The client, or their accounting department, will verify the accuracy of the invoice and review the bill. If there are any discrepancies, they may send it back to you for a re-issue, but if it’s accepted, it remains an open invoice until it’s paid on or before the payment deadline.
If the bill is paid on time, then it becomes a closed invoice. If not, it turns into an overdue or past-due bill. If you’re wondering, “How often should I invoice as a freelancer?” or, “How will the frequency of billing affect open invoices?” know that you typically only have to bill once a month or after a short-term project has ended, depending on your billing policy. If your client has past due payments, then you can simply follow up on the existing invoice instead of sending a new one.
Types of Open Invoices
Open invoices can be categorized into the following types:
Bills are open invoices that have gone past the due date, and they sit as such until they’re paid. In this case, the client may be charged a late penalty fee.
An incomplete payment is an open invoice wherein a payment was attempted but didn’t succeed for some reason, such as incorrect bank details or insufficient funds. It’s important to note these as they may need extra steps to be addressed.
Manual Pending Payments
This type of open invoice requires manual confirmation before it can be marked as paid. It usually involves invoices that are settled via cash, check, or bank transfer payments that need to be verified.
You may be automating your payments. If so, an invoice may be left open as the system still confirms the fulfillment.
Reasons for Open Invoices
Sometimes, open invoices are unavoidable. It helps to understand the common reasons behind them so that you can take the extra steps to fix any errors or faulty systems in the process.
Some agreements and invoices allow partial payment of services. This happens when payments are collected up-front or when clients are permitted to pay only a certain amount, then settle the balance later. It’s also common in projects wherein initial costs are difficult to estimate. Since the bill isn’t paid in full, it remains an open invoice.
If there are errors in the invoice, such as incorrect bank details or duplicate charges, your client may notify you and ask for a re-issue. While this can be solved easily, in some instances, it can lead to late payments.
Some clients may receive an invoice and refuse to pay. They may not have been happy with the services rendered or they find that there has been a misalignment in their understanding of the contract. Either way, it’s best to review your agreement and take the necessary steps to resolve the dispute.
Slow Processing Times
Even if your client wants to pay quickly, they may be restricted by slow processing times, either by their company’s accounting department or by their payment method.
Easy Invoicing With Invoice Ninja
To ensure proper financing and consistent cash flow, you always want to aim to close all of your invoices. One great way to do this is to employ invoicing software like Invoice Ninja. Not only do you get templates that make the invoicing process much simpler, but you can use tools like automatic follow-ups and online payments to make it easier for clients to settle their transactions. Try Invoice Ninja today!