How to Make an Interim Invoice
Jul 14, 2020
Everything That You Should Know About Interim Invoice
Do you have a question on how to make an Interim Invoice? An interim invoice is issued to the customer before the start of the project. To create an interim invoice for small businesses, the vendor will have to draft an achievable cost for the whole project.
Before commencing the job, the vendor will also reach an agreement as to how payment will be made. With interim invoices, small business owners can get paid as the job progresses until it is completed. It is good for long-term projects as it helps the business owner maintain cash flow.
In this aspect of the guide, we’ll cover:
- How to Create an Interim Invoice
- What is an Interim Invoice?
- When is an Interim Invoice Issued?
- Advantages of Progress Invoices
How to Create an Interim Invoice
The following steps will put you through how to create an interim invoice:
Prepare An Estimate For The Project
Before you create the interim invoice for a project, you need to calculate how long it will take to finish the project, maybe by hours or so. Also, you have to make plans for associated costs the job will incur; you may need extra labor or equipment to finish up.
If you’re working by the hour, calculate all the hours you’ll need by the hourly rate you charge and add up all associated costs. Send your client a report of the cost so they can agree with you. The estimate will be the basis of what your interim invoice would be.
Agree To A Schedule
When the client approves the estimate for the project, you can reach another agreement to decide when to submit interim invoices. Typically, interim invoices are sent once a month if the project is a large one.
The duration of the project will help you decide how much to charge your customer when you send the interim invoice.
For example, if the project will last for six months and you choose to invoice the customer every month, you can divide the total cost for the job into six parts so you can bill one-sixth every month. That means you’ll be sending a total of six invoices throughout the project duration.
Send Interim Invoices As Scheduled
When you agree on a timely basis with the client to send an invoice, do not shift the date. If you have payment deadlines, include them so you can get paid in time.
Send A Final Invoice
After completing the project within the given period, send the client a final invoice. The final invoice has to be detailed and descriptive enough than the timely interim invoices.
It should contain all the necessary corrections and updates on the cost of the project. The final invoice will include these details:
- A detailed list of all services rendered
- A final invoice number
- The total amount charged for the project
- Total hours worked
- Due date of payment
- Accepted payment methods
What Is an Interim Invoice?
An interim invoice is otherwise known as a progress invoice and is a method of accounting where invoices are issued regularly to a client. The billing on the invoice is a part payment of the whole project that has been achieved so far. Interim invoices are always agreed upon by the seller and buyer from the start of the project and are often sent to the customer monthly, weekly, or quarterly basis.
When is an Interim Invoice Issued?
Depending on a discussed agreement between the buyer and seller, interim invoices are sent when the project is large or will time to be completed. To maintain the cash flow of a business, the business owner has to send interim invoices until the project is completed.
Advantages of Interim Invoices
Sending interim invoices from time to time will boost the business cash flow and reduce the risk of not getting paid. Below are the advantages of progress invoice:
Unaffected Cash Flow
A major benefit of businesses issuing interim invoices is to avoid interruption of their cash flow. When a vendor has to wait for long before getting paid, interim invoices will reduce the risk of delayed payment as it will help the vendor get paid with the progress of the job.
Cash flow interruption is the reason why most businesses run into debts or shut down. Progress invoicing is a smart way that helps get paid little by little.
Reduced Risk Of Not Getting Paid
Invoicing the client on a timely basis will get you paid more quickly than waiting for the project to finish. You can rest assured that your payment will be completed when a customer pays you as you send the interim invoices.
Not getting paid after sending a few invoices will hint to you whether you’re going to be paid fully or not. With this, you can discuss with customers to figure out what the problem is. You can as well cancel the project if you find out the customer is not capable of paying you.
Flexibility For The Client
Providing an option to pay little by little will boost customer relationships and help you get new customers. It will also strengthen the bond between you and your long-term customers. With interim invoices, customers will trust you to complete the job as you get paid, and they can spend time on other tasks.