Vol VI: Your First Labor Invoice

posted in: Production Book | 0
This entry is part 6 of 6 in the series Production Entry-Level Guide

First of all, CONGRATS! You’ve completed your first job and now you’re ready to get paid! For many of you this will be the first invoice you’ve ever made and you may be a bit confused about what is necessary.

This article will take you through the critical elements of your invoice, including an interactive sample invoice illustrating each section.

Currently, I use Google Docs to generate all of my labor invoices. For an in-depth look at building your invoice using Google Drive, please check out this article from my series: Freelancer’s Guide to Google Drive: Building Your Labor Invoice from Scratch.

Quick disclaimer: I am not a certified CPA, nor am I an accounting professional. The purpose of this article is to simply show you the methods of invoicing that have worked for me throughout my career in Production. As always, I recommend seeking professional advice for all accounting and tax-related questions, especially as they pertain to the jurisdiction you live.

What is an Invoice

So, what is an invoice anyway? Well, an invoice is the document that bills for your wages. It contains critical information about you (the payee), the producer or client (the payor), job reference and a breakdown of your wages and terms.

Typically an invoice is submitted directly to the Producer, the Client or their respective accounts payable departments and is accompanied with an IRS tax form (i.e. W-2 or W-9, depending on your status. More on this here).

Now, there are a million different ways you can format your invoice, but there are some critical elements that every invoice requires. Check out the interactive document below for a more granular look at each one:

Critical Elements

Include your contact information right away in the header. This is also a great area to start branding yourself with interesting (but legible) font and colors.

This most important element here, of course, is the job reference. This is a code that has been generated by the Production Company or Client that identifies the job for billing purposes. The job reference must be presented exactly as instructed.

Your PM will give you invoicing instructions for the assignment. Sometimes you'll be invoicing the Production company or the Client directly.

Either way, you'll want to make sure you follow invoicing instructions completely and put the correct name, address and person / department on the invoice.

Invoice Number: Should be serialized and consistent. You can choose any naming convention you wish, but it must be the same on all invoices.

For example, if you choose to number your invoices in the YEAR-00# format, it must always appear that way.

  • 2018-001
  • 2018-002
  • 2018-003
  • and so on

Date Sent: This is a very important element of your invoice, as it essentially starts the clock on Net Terms of your invoice. More on Net Terms below.

Due Date: Even though this is somewhat redundant because you've listed Date Sent and Net Terms, it's still good practice to take the guess work out of your payment schedule and list the due date for payment

Net Terms: This provides how many days the client has from the Date Sent to pay you without penalty.

This is a good area to provide any additional terms and notices that will be important for the Client to know.

You'll want to include Payable information, which is your full, legal name associated with your bank account.

Also make clear any terms of late payment penalties. These are standard on most production invoices, but are rarely enforced. It's still very good practice to have this language on your invoice in the event a dispute arises.

This is the meat of your invoice. This is where you will describe the activities performed, the day rate agreed upon, the quantity and amount due. It's very important that your description be thorough and complete. Include information such as:

  • Date worked (including year)
  • Role
  • Negotiated Day Rate and negotiated day duration (how many hours each day is based on)
  • Overtime information, if applicable (to get help calculating OT, check out my article here

I know this appears twice, but it never hurts to be redundant with important information like this. Your client will probably read the invoice from top to bottom. Why make her / him scroll back up when you can just restate it?

It is also here where you can establish the forms of payment you will accept. Physical, paper checks are standard, but wire transfers are becoming more widely used. If acceptable to the client, you can even include your Venmo, Paypal or Zelle.

NOTE: If you list your wire transfer number, make sure you are providing the correct electronic wire transfer number. Contact your bank if you are having difficulty locating it.

The last element of your invoice should be a "Thank you" to the receiver. Showing gratitude for the opportunity to earn a living doing what you love is something we should all be doing regularly.

Keeping Track of Accounts Payable

As you get more and more work, you will realize the importance of being super organized – especially with your income documentation! Accounts Receivables is a fancy accounting term for money that is owed to you for services performed.

Accounting principals follow very logical pathways and create dependencies between the different departments to balance out. For example, the act of sending out an invoice, creates a balance in your Accounts Receivables account. Once payment is received, the amount is deducted from this account and added to your Gross Receipts or Gross Income account. Of course, unless you are using a fancy (and often expensive) bookkeeping platform, you will have to manually update each account appropriately. It’s important to be both diligent and consistent with this to ensure your books are accurate. You can use any spreadsheet software you like (i.e. Microsoft Excel, Google Sheets, etc). I, personally, use Google Sheets (more on setting up your books in my series: Freelancer’s Guide to Google Drive: Setting Up Your Books – COMING SOON). Since you are just starting out, you should only worry about Accounts Receivables and Gross Receipts with regard to your labor income.

To illustrate the need for exceptional bookkeeping records, consider one of the quirks of the production industry: ill-defined Net Terms. As explained above, Net Terms simply means how long a payor has to pay you before the invoice is considered past due. In production this can range anywhere from 30 days to 90 (with rare occurrences of 180 days). Obviously these Net Terms are less than ideal for contractors, especially those starting out. Over the past few years, the landscape has changed considerably with payment terms shrinking down to somewhere between “On Receipt” (due immediately) to “Net 15”.

Regardless of the Net Terms of your job, you can clearly see that over the course of 30 to 180 days it can be very difficult to remember what is owed to you. Once you start working regularly, it may even be difficult to match up payments received with a particular invoice (they all tend to run together after a while). That’s where your Accounts Receivables spreadsheet comes in handy!

Basic Steps

NOTE: If you haven’t already created your own Accounts Receivables spreadsheet, feel free to open my template so you can follow along. You’ll be prompted to copy the sheet to your google account. I’ve also noted all headers with additional explanations.

1. Every time you create a new invoice, you should copy all corresponding invoice information into the appropriate cells on your sheet.

2. Regularly monitor your sheet to view outstanding payments.

If payment is due or past due, do not feel weird or shy about reaching out to the Producer or Client via email. You’ll want to be professional, but firm in your payment request (especially if past due). NEVER say anything threatening (legal or physical).

An example of language I have used in the past is:

“I’m reaching out to request an update on the status of my payment for job#—-. I submitted my invoice via email on [date] with a net term of 15. Today is [currentDate], which is [overageDay] past due. I look forward to hearing back from you. Thank you!”

In the above example, I have laid out the facts and firmly requested an update on my payment status. It creates a sense of urgency without sounding threatening. However, in the event that a client does not pay you or is extremely late, which may or may not require legal action, a paper trail is always advisable to have. But I should mention that legal action should ALWAYS BE THE LAST RESORT.

Finally, once payment is received, immediately update your Accounts Receivables spreadsheet to successfully close out the job in your books.

And that’s it! Pretty easy, right? If you set yourself up for success initially, all the chips will fall into place and become a well-oiled machine. Happy invoicing!


Series Navigation<< Vol V: Dos & Don’tsPrivate: Vol VII: Your First Expense Report >>
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