How to Make an Interim Invoice
Oct 20, 2021
Everything That You Should Know About 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 achievable project costs.
Before commencing the job or giving an initial estimate, 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 large projects as it helps the business owners maintain a steady cash flow.
In this section of the guide, we’ll cover:
- What is an Interim Invoice?
- When is an Interim Invoice Issued?
- What Should be Included in an Interim Invoice Template?
- How to Create an Interim Invoice?
- Advantages of Progress Invoices
- Why You Should Have Interim Invoice Templates?
What is an Interim Invoice?
An interim invoice (also known as a progress invoice) is an accounting method where invoices are issued regularly to a client, especially for larger projects.
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 on a monthly, weekly, or quarterly basis.
When is an Interim Invoice Issued?
Depending on a discussed agreement between the buyer and seller (freelancer or service provider), interim invoices are sent when you have a large project or will take time to be completed. To maintain the steady cash flow of all your businesses, the small business owner has to send interim invoices until the project is completed.
What Should be Included in an Interim Invoice Template?
Interim invoice differs from other different types of invoices. An interim invoice template must have the following information:
- Business contact information (email or phone numbers);
- Company logo;
- Invoice number;
- Invoice date
- Payment due date;
- Company website;
- Payment methods;
- A description of work done;
- The amount due for each service;
- Extra costs like taxes and expenses (if any);
- Your payment terms and account details
Remember that the invoice format remains the same for almost all the clients. The only thing that differs is the amount you enter in your invoice.
How to Create an Interim Invoice?
The following steps will put you through how to create an interim invoice:
Step 1: Prepare an Estimate For The Project
Before you create the invoice for a large 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 project costs that 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 critical 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.
Step 2: Agree to a Schedule
When the client approves the project estimate, you can reach another agreement to decide on submitting interim invoices or part work.
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 or for several months and you choose the interim invoicing process for 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 timeline. In simple words, it makes your payment schedule easier.
Step 3: Send Interim Invoices As Scheduled
When you agree on a timely basis with the client to send one invoice format, do not shift the date. If you have payment deadlines, include them so you can get the payment in time.
Step 4: Send a Final Invoice
After completing the project within the given period, send the client one 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:
- An itemized 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 or account details
What are the Advantages of Interim Invoices?
Sending interim invoices from time to time will boost the businesses’ cash flow and reduce the risk of dealing with unpaid invoices and also not getting paid.
Below are the advantages of progress invoicing:
Unaffected Cash Flow
A major benefit of businesses issuing interim invoices is to avoid interruption of their regular cash flow. When a vendor has to wait for a longer period 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 entire project to finish. You can rest assured that your multiple payments will be completed when a client 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.
Providing More 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.
Why You Should Have Interim Invoice Templates?
If you are doing larger projects for the client regularly, an interim invoice template will help you speed up your most important administrative tasks. With such templates, you just have to simply open the template, update or edit it as per your business needs, and send the invoice to the clients.
For large projects, an interim invoicing template helps you maintain a steady business cash flow. You won’t have to wait till the end of a large project to get paid, especially when you know it will take much of your time and stop you from working for other clients.
Sending an interim invoice can be positive for clients too. It will give them more flexibility in assigning a large project without any hassle. If your client is a small business owner, they don’t have to pay upfront for a large amount of work.
You can break down the work of a big project into various parts and adjust the payment for that particular work.
The interim invoice template ensures you get paid for the submitting work. In case if you find out that the client is delinquent and not paying for the services, even if you send them invoices regularly, you can stop working on that project immediately.
The main reason for using an interim invoice is that you can deal with the payment issues before you have spent too much time with that particular project. If you have contacted the client about the non-payment and it continues to be an issue, you can determine to cancel the project.
You can be confident that the client will pay in the future till the clients pay you consistently for the interim invoices. On the other side, clients will also be reassured that their work is getting done on time since you are submitting deliverables or part work regularly along with the billing document to get the payment on time. Interim invoices are the best option for you and your clients.