When’s The Right Time To Invoice A Customer?

Invoice timing plays a crucial role in managing your business’s cash flow. But have you ever considered whether you’re sending your invoice at the right time during your customer’s journey?

A well-timed invoice not only helps your cash flow but can also reduce the friction between your business and your customers, increasing their customer experience and their likelihood of placing an order with you in the future.

The timing of your invoice needs to consider several factors, such as the nature of your business, your contract with the customer and your relationship with the customer.

To understand the right time to invoice, you must first understand what an invoice is used for.

What are invoices used for?

There are several reasons for businesses to use invoices, including:

  • Request for payment - this is your way of officially requesting payment from your customers
  • Record the sale - invoices detail what was sold, how much was sold and at what price, meaning you can track the order, analyse business performance and make informed business decisions
  • Legal protection - if your customer raises a dispute over your services or the details of a transaction, the invoice serves as a legal record of your agreement with them
  • Audit trail - invoices are your evidence of business transactions, ensuring you’re compliant with taxes and other regulations

The main reason you’re sending an invoice is to request payment from your customer while clarifying your payment terms. If this is your business’s primary reason for invoicing, then you must time your invoice correctly.

When should I send an invoice?

There’s no straight answer for when you should send an invoice to your customer; it depends on how you work and how your customer works.

Product-based businesses

Typically, product-based businesses send their invoice at the point of sale.

For example, physical shops hand you a receipt for what you’ve bought, or if a customer is buying through an e-commerce website, they’re provided an invoice once they’ve confirmed the order.

Service-based businesses

Consultancies, marketing agencies and freelancers often invoice after the service has been provided to the customer. For example, a web developer might invoice after the project has been signed off by the client and made live.

Another version of service-based invoicing involves sending periodic invoices, such as monthly or quarterly, for ongoing services. The frequency of these invoices will depend on your agreement with your customer.

Progress invoicing

Although you can use progress invoicing for any project, it’s mostly used for longer, high-value projects.

Customers can be reluctant to pay upfront for high-value projects like construction or web development. However, businesses are just as at risk if they’re providing services without receiving a payment from the customer. This is where progress invoicing can be used. The cost of the project is broken down into smaller payments, which are invoiced as the project progresses.

Take the following example: a builder asks for a deposit to fit a new bathroom; this initial payment is to pay for the materials needed to start the job. Following the “rip-out” of the old bathroom, the builder asks for a second payment; this payment could be for buying the new bathroom suite. Then, following the fit of the new bathroom suite, the builder asks for the final payment.

This is a simple example of progress invoicing but shows how it can be used to help cash flow when invoicing for large projects.