[{"data":1,"prerenderedAt":1536},["ShallowReactive",2],{"page-\u002Fwhat-is-invoice-factoring":3,"related-\u002Fwhat-is-invoice-factoring":593},{"id":4,"title":5,"author":6,"body":7,"category":579,"date":580,"dek":581,"description":582,"extension":583,"featured":584,"meta":585,"navigation":586,"path":587,"readingTime":588,"seo":589,"sitemap":590,"stem":591,"__hash__":592},"content\u002Fwhat-is-invoice-factoring.md","What Is Invoice Factoring? How It Works, Costs & Alternatives","Daniel Reed",{"type":8,"value":9,"toc":564},"minimark",[10,15,19,22,25,29,32,65,68,79,117,120,125,128,147,151,158,162,165,175,184,187,262,265,269,272,308,315,320,350,354,357,387,390,420,423,427,430,447,458,474,484,494,500,506,509,513,558,561],[11,12,14],"h2",{"id":13},"the-60-day-gap-that-sinks-profitable-businesses","The 60-day gap that sinks profitable businesses",[16,17,18],"p",{},"You invoice a client £18,000 for a completed project. Payment terms are net 60. Meanwhile payroll is due in two weeks, a supplier wants paying, and your own rent doesn't care that the money is \"on its way.\" The work is done, the invoice is legitimate, and you are still short of cash.",[16,20,21],{},"Invoice factoring exists for exactly this gap. It lets you sell your unpaid invoices to a third party (a factor) for most of their value now, instead of waiting for the client to pay. You get cash fast; the factor takes a cut and, usually, the job of chasing the client.",[16,23,24],{},"It can be a lifeline. It can also be an expensive habit that quietly eats your margin. The trick is understanding precisely what you're paying for and whether a cheaper fix would solve the same problem.",[11,26,28],{"id":27},"how-invoice-factoring-actually-works","How invoice factoring actually works",[16,30,31],{},"The mechanics are consistent across the US, UK, Canada, and Australia, even though providers dress them up differently.",[33,34,35,43,53,59],"ol",{},[36,37,38,42],"li",{},[39,40,41],"strong",{},"You raise an invoice"," to a creditworthy business client on normal terms.",[36,44,45,48,49,52],{},[39,46,47],{},"You sell that invoice to a factor."," They advance you a percentage of the face value straight away, typically ",[39,50,51],{},"70–90%",". This is the \"advance rate.\"",[36,54,55,58],{},[39,56,57],{},"The factor collects payment"," from your client when the invoice falls due.",[36,60,61,64],{},[39,62,63],{},"You get the rest, minus fees."," Once the client pays, the factor releases the withheld balance (the \"reserve\") after deducting their charges.",[16,66,67],{},"A worked example makes the money flow obvious.",[16,69,70,71,74,75,78],{},"Say you factor a $20,000 invoice at an ",[39,72,73],{},"85% advance rate"," with a ",[39,76,77],{},"3% factoring fee",":",[80,81,82,88,94,100,106,112],"ul",{},[36,83,84,85],{},"Advance paid to you upfront: $20,000 × 85% = ",[39,86,87],{},"$17,000",[36,89,90,91],{},"Reserve held back: ",[39,92,93],{},"$3,000",[36,95,96,97],{},"Factor's fee: $20,000 × 3% = ",[39,98,99],{},"$600",[36,101,102,103],{},"When the client pays, you receive the reserve minus the fee: $3,000 − $600 = ",[39,104,105],{},"$2,400",[36,107,108,109],{},"Total you receive: $17,000 + $2,400 = ",[39,110,111],{},"$19,400",[36,113,114,115],{},"Cost of factoring that invoice: ",[39,116,99],{},[16,118,119],{},"You've effectively paid $600 to get most of $20,000 roughly 30–60 days early.",[121,122,124],"h3",{"id":123},"recourse-vs-non-recourse","Recourse vs non-recourse",[16,126,127],{},"This distinction decides who eats the loss if the client never pays.",[80,129,130,141],{},[36,131,132,135,136,140],{},[39,133,134],{},"Recourse factoring:"," if the client defaults, ",[137,138,139],"em",{},"you"," buy the invoice back or repay the advance. Cheaper, because the factor carries less risk. Most factoring is recourse.",[36,142,143,146],{},[39,144,145],{},"Non-recourse factoring:"," the factor absorbs the loss if the client becomes insolvent. More expensive, and the protection is narrower than it sounds. Non-recourse often covers only genuine insolvency, not a client who simply disputes the work or drags their feet. Read the definition of a \"credit event\" in the contract before you assume you're covered.",[121,148,150],{"id":149},"notified-vs-confidential","Notified vs confidential",[16,152,153,154,157],{},"In most factoring arrangements, the factor contacts your client directly and payment is redirected to the factor. Your client knows. Some providers offer ",[39,155,156],{},"confidential factoring",", where collection appears to still come from you, but expect to pay more for the discretion.",[11,159,161],{"id":160},"factoring-vs-invoice-financing-not-the-same-thing","Factoring vs invoice financing: not the same thing",[16,163,164],{},"People use these terms interchangeably. They're different products with different risks.",[16,166,167,170,171,174],{},[39,168,169],{},"Invoice factoring"," = you ",[137,172,173],{},"sell"," the invoices. The factor owns the debt and does the chasing. Your client typically deals with the factor.",[16,176,177,170,180,183],{},[39,178,179],{},"Invoice financing (or invoice discounting)",[137,181,182],{},"borrow against"," the invoices. You keep ownership, you keep collecting from your clients, and the lender advances you funds using the invoice book as security. It's a loan facility, not a sale.",[16,185,186],{},"Which suits you depends on control:",[188,189,190,205],"table",{},[191,192,193],"thead",{},[194,195,196,199,202],"tr",{},[197,198],"th",{},[197,200,201],{},"Factoring",[197,203,204],{},"Invoice financing \u002F discounting",[206,207,208,220,231,240,251],"tbody",{},[194,209,210,214,217],{},[211,212,213],"td",{},"Who chases the client",[211,215,216],{},"The factor",[211,218,219],{},"You",[194,221,222,225,228],{},[211,223,224],{},"Client aware?",[211,226,227],{},"Usually yes",[211,229,230],{},"Usually no (confidential)",[194,232,233,236,238],{},[211,234,235],{},"Who owns the debt",[211,237,216],{},[211,239,219],{},[194,241,242,245,248],{},[211,243,244],{},"Admin burden",[211,246,247],{},"Lower (they handle collections)",[211,249,250],{},"Higher (you still collect)",[194,252,253,256,259],{},[211,254,255],{},"Typical fit",[211,257,258],{},"Small firms with limited back-office",[211,260,261],{},"Larger firms with solid credit control",[16,263,264],{},"A one-person consultancy that hates chasing payments may prefer factoring. A £2m turnover agency with a proper finance function usually wants discounting, because it keeps client relationships in-house and stays confidential.",[11,266,268],{"id":267},"what-it-really-costs","What it really costs",[16,270,271],{},"Factoring pricing is deliberately fiddly, which makes it hard to compare providers. Watch for these components:",[80,273,274,284,290,296,302],{},[36,275,276,279,280,283],{},[39,277,278],{},"Discount\u002Ffactoring fee:"," the headline charge, often ",[39,281,282],{},"1–5% per invoice",", sometimes quoted per 30 days outstanding. An invoice that pays late costs you more.",[36,285,286,289],{},[39,287,288],{},"Service or management fee:"," an ongoing charge, sometimes a percentage of turnover put through the facility.",[36,291,292,295],{},[39,293,294],{},"Setup and due-diligence fees:"," one-off charges to open the arrangement.",[36,297,298,301],{},[39,299,300],{},"Minimum monthly fees:"," you may be charged a floor even if you factor little that month.",[36,303,304,307],{},[39,305,306],{},"Facility fees, audit fees, and CHAPS\u002Fwire transfer charges:"," small individually, meaningful in aggregate.",[16,309,310,311,314],{},"Translate any quote into a real annualised cost. A 3% fee on a 30-day invoice looks small, but repeated every month it approaches ",[39,312,313],{},"36% APR-equivalent"," on the advanced money. That's far higher than most business loans or credit lines. Factoring is priced like short-term convenience, not like cheap debt.",[16,316,317],{},[39,318,319],{},"Watch the contract terms as much as the price:",[80,321,322,332,338,344],{},[36,323,324,327,328,331],{},[39,325,326],{},"Whole-turnover clauses"," require you to factor ",[137,329,330],{},"all"," your invoices, not just the ones you choose.",[36,333,334,337],{},[39,335,336],{},"Long notice periods"," (12 months is common) lock you in even if you find something better.",[36,339,340,343],{},[39,341,342],{},"Minimum term commitments"," and early-exit fees.",[36,345,346,349],{},[39,347,348],{},"Concentration limits"," capping how much of your book can be one client.",[11,351,353],{"id":352},"when-factoring-makes-sense-and-when-it-doesnt","When factoring makes sense, and when it doesn't",[16,355,356],{},"It can be a reasonable tool if:",[80,358,359,366,377,384],{},[36,360,361,362,365],{},"You sell to ",[39,363,364],{},"other businesses on credit terms"," (factoring rarely works for consumer invoices or paid-upfront work).",[36,367,368,369,372,373,376],{},"Your clients are ",[39,370,371],{},"creditworthy"," but slow. Factors price on your ",[137,374,375],{},"clients'"," credit, not just yours, which can help newer businesses.",[36,378,379,380,383],{},"You're ",[39,381,382],{},"growing faster than your cash allows"," and turning down work for lack of working capital.",[36,385,386],{},"The margin on your work comfortably absorbs the fee. A 40% gross margin can survive a 3% factoring cost; a 6% margin cannot.",[16,388,389],{},"It's usually a poor fit if:",[80,391,392,399,406,413],{},[36,393,394,395,398],{},"Your invoices are ",[39,396,397],{},"small and numerous"," (fees and admin overwhelm the benefit).",[36,400,401,402,405],{},"You bill ",[39,403,404],{},"consumers or do B2C"," work.",[36,407,408,409,412],{},"Your ",[39,410,411],{},"margins are thin",", so the fee erases your profit.",[36,414,415,416,419],{},"The cash-flow problem is ",[39,417,418],{},"structural"," rather than timing-based. Factoring smooths timing; it can't fix a business that loses money on every job.",[16,421,422],{},"The real danger is dependency. Once your operating cash depends on the advance, stopping is painful, because you'd have to survive the gap while the facility unwinds. Some businesses stay factored for years and never claw back the margin.",[11,424,426],{"id":425},"cheaper-alternatives-worth-trying-first","Cheaper alternatives worth trying first",[16,428,429],{},"Before selling your receivables, work through the cheaper fixes. Several cost nothing but effort.",[16,431,432,435,436,441,442,446],{},[39,433,434],{},"Get paid faster in the first place."," A surprising share of the \"cash gap\" comes from slack invoicing habits, not genuinely slow clients. Invoice the day the work completes, not at month-end. Tighten your terms. See ",[437,438,440],"a",{"href":439},"\u002Fhow-to-get-invoices-paid-faster","how to get invoices paid faster"," and rethink your ",[437,443,445],{"href":444},"\u002Finvoice-payment-terms","payment terms"," — moving from net 60 to net 14 or net 30 may remove the problem entirely.",[16,448,449,452,453,457],{},[39,450,451],{},"Take deposits and stage payments."," Charging 30–50% upfront and billing milestones on longer projects shifts cash toward the start. ",[437,454,456],{"href":455},"\u002Fhow-to-ask-for-a-deposit-upfront-invoices","Asking for a deposit"," is standard practice in most trades and services, and it costs you nothing.",[16,459,460,463,464,468,469,473],{},[39,461,462],{},"Chase properly and early."," A structured reminder sequence recovers far more than most people expect. Use ",[437,465,467],{"href":466},"\u002Fpayment-reminder-email-templates","payment reminder email templates"," and don't be shy about escalating when a ",[437,470,472],{"href":471},"\u002Fwhat-to-do-when-a-client-wont-pay","client won't pay",".",[16,475,476,479,480,483],{},[39,477,478],{},"Offer an early-payment discount."," Something like \"2% off if paid within 10 days\" (often written ",[137,481,482],{},"2\u002F10 net 30",") can pull cash forward for a fraction of a factor's fee. If a client would otherwise pay in 45 days, 2% for 35 days early is far cheaper than 3% monthly factoring.",[16,485,486,489,490,473],{},[39,487,488],{},"Charge late fees."," Statutory or contractual interest gives slow payers a reason to prioritise you. Here's ",[437,491,493],{"href":492},"\u002Fhow-to-charge-late-fees-on-overdue-invoices","how to charge late fees on overdue invoices",[16,495,496,499],{},[39,497,498],{},"A business overdraft or line of credit."," For businesses with a decent bank relationship, a revolving credit line is often cheaper than factoring and doesn't involve your clients at all.",[16,501,502,505],{},[39,503,504],{},"A business credit card"," for short bridging gaps, if you clear it inside the interest-free window.",[16,507,508],{},"Run the numbers side by side. If a client pays in 40 days and you need the cash for 30 of them, compare the factoring fee against your overdraft interest for 30 days on the same amount. Factoring frequently loses that comparison badly.",[11,510,512],{"id":511},"questions-to-ask-any-factor-before-signing","Questions to ask any factor before signing",[80,514,515,522,529,536,542,548,551],{},[36,516,517,518,521],{},"What's the ",[39,519,520],{},"advance rate",", and what triggers release of the reserve?",[36,523,524,525,528],{},"Is it ",[39,526,527],{},"recourse or non-recourse",", and exactly what does non-recourse cover?",[36,530,531,532,535],{},"Is this ",[39,533,534],{},"whole-turnover"," or can I pick invoices (selective\u002Fspot factoring)?",[36,537,517,538,541],{},[39,539,540],{},"all-in cost"," including service, minimum monthly, and transfer fees, expressed annually?",[36,543,517,544,547],{},[39,545,546],{},"notice period and minimum term","?",[36,549,550],{},"Will you contact my clients, and how (notified vs confidential)?",[36,552,553,554,557],{},"What happens if a client ",[39,555,556],{},"disputes"," an invoice?",[16,559,560],{},"If a provider won't give you a clear all-in figure, treat that as the answer.",[16,562,563],{},"Factoring is neither a scam nor a magic fix. It's expensive money that buys you time. Reach for it when the work is real, the clients are solid, your margin can carry the fee, and the cheaper levers above genuinely won't close the gap fast enough. For most freelancers and small firms, tightening terms and chasing harder solves the same problem without handing away 3% of every invoice.",{"title":565,"searchDepth":566,"depth":566,"links":567},"",3,[568,570,574,575,576,577,578],{"id":13,"depth":569,"text":14},2,{"id":27,"depth":569,"text":28,"children":571},[572,573],{"id":123,"depth":566,"text":124},{"id":149,"depth":566,"text":150},{"id":160,"depth":569,"text":161},{"id":267,"depth":569,"text":268},{"id":352,"depth":569,"text":353},{"id":425,"depth":569,"text":426},{"id":511,"depth":569,"text":512},"Getting Paid","2026-07-03",null,"How invoice factoring and invoice financing work for small businesses waiting on unpaid invoices, what they really cost, and cheaper ways to fix cash flow.","md",false,{},true,"\u002Fwhat-is-invoice-factoring","8 min read",{"title":5,"description":582},{"loc":587},"what-is-invoice-factoring","1pQ11yrdCnGXJxeK7KIvIbyCqmUiifT50j3WJLbBN7c",[594,1024],{"id":595,"title":596,"author":6,"body":597,"category":1015,"date":1016,"dek":581,"description":1017,"extension":583,"featured":584,"meta":1018,"navigation":586,"path":1019,"readingTime":588,"seo":1020,"sitemap":1021,"stem":1022,"__hash__":1023},"content\u002Fhow-to-bill-clients-for-expenses.md","How to Bill Clients for Expenses: Reimbursable Expenses on Invoices",{"type":8,"value":598,"toc":1002},[599,603,606,613,616,620,623,636,639,659,662,666,669,675,681,688,691,695,698,703,834,840,843,851,855,865,869,884,894,907,911,919,923,936,947,951,958,961,965,999],[11,600,602],{"id":601},"what-counts-as-a-reimbursable-expense-and-what-doesnt","What counts as a reimbursable expense (and what doesn't)",[16,604,605],{},"A reimbursable expense is a cost you incur on a project that the client has agreed to pay back. You front the money, then recharge it. Classic examples: a train fare to a client site, a stock photo licence bought for their brochure, a domain and hosting plan set up in their name, or a specialist subcontractor you hired to finish part of the job.",[16,607,608,609,612],{},"What is ",[137,610,611],{},"not"," reimbursable is your ordinary cost of being in business. Your laptop, your accounting software subscription, your home office internet, your professional insurance — those are overhead. You recover them through your rate, not by itemising them on a client invoice. The line matters because clients push back hard when they see costs they consider \"your problem\" appearing on a bill.",[16,614,615],{},"The cleanest test: would this cost exist if the project didn't? A flight booked specifically for one client's workshop fails the \"would exist anyway\" test, so it's reimbursable. Your Adobe subscription would exist regardless, so it's overhead.",[11,617,619],{"id":618},"agree-the-rules-before-you-spend-a-penny","Agree the rules before you spend a penny",[16,621,622],{},"Most expense disputes are really scope disputes that surfaced late. Kill them in the contract or proposal. A short clause is enough:",[624,625,626],"blockquote",{},[16,627,628],{},[137,629,630,631,635],{},"Expenses: The Client will reimburse pre-approved out-of-pocket costs incurred on this project, including travel, accommodation, third-party software licences, and subcontractor fees. Costs above $150 per item require written approval in advance. Expenses are billed at cost and supported by receipts. Mileage is charged at ",[632,633,634],"span",{},"rate"," per mile.",[16,637,638],{},"Three things that clause does for you:",[80,640,641,647,653],{},[36,642,643,646],{},[39,644,645],{},"Sets an approval threshold."," Anything above the limit needs a yes in writing. Below it, you're covered to just spend and recharge.",[36,648,649,652],{},[39,650,651],{},"States the markup policy up front"," (here, \"at cost\" — no markup). Decide this deliberately; more on markup below.",[36,654,655,658],{},[39,656,657],{},"Requires receipts",", which signals you'll keep clean records and pre-empts the \"can you prove that?\" conversation.",[16,660,661],{},"Get the client to confirm expensive items by email before you commit. A one-line \"Booking the Tuesday flight at £142, confirming that's approved\" costs you nothing and turns a possible fight into a paper trail.",[11,663,665],{"id":664},"to-mark-up-or-not-to-mark-up","To mark up or not to mark up",[16,667,668],{},"There are two honest positions, and clients treat them very differently.",[16,670,671,674],{},[39,672,673],{},"Billing at cost (pass-through)."," You recharge exactly what you paid. A £142 flight becomes a £142 line. This is the norm for genuine third-party disbursements and it builds trust because there's nothing to argue about. The downside: you carry the cash-flow burden and admin for free.",[16,676,677,680],{},[39,678,679],{},"Adding a handling markup."," Some agencies add 10–20% to expenses to cover the time spent booking, coordinating, and financing the cost. This is legitimate as long as it's disclosed. What damages relationships is a hidden markup a client discovers by seeing the original receipt. If you mark up, either state the percentage in your contract or fold the handling into a separate \"coordination fee\" line rather than inflating the receipt total.",[16,682,683,684,687],{},"A middle path many freelancers use: pass genuine disbursements through at cost, but bill your own ",[137,685,686],{},"time"," spent managing a subcontractor or sourcing materials as normal billable hours. That keeps the expense honest and still pays you for the work.",[16,689,690],{},"For mileage, use your tax authority's standard rate as a defensible number rather than guessing. In the US the IRS sets an annual business mileage rate; the UK uses HMRC approved mileage allowance payments (commonly quoted as 45p per mile for the first 10,000 miles); Canada and Australia publish their own per-kilometre figures. These change, so check the current rate for your country each tax year.",[11,692,694],{"id":693},"how-to-list-expenses-on-the-invoice","How to list expenses on the invoice",[16,696,697],{},"Keep expenses visually distinct from your fees. Clients scan invoices, and burying a £600 subcontractor cost inside your service total invites suspicion. Two structures work well.",[16,699,700],{},[39,701,702],{},"Option A — a dedicated expenses block:",[188,704,705,721],{},[191,706,707],{},[194,708,709,712,715,718],{},[197,710,711],{},"Description",[197,713,714],{},"Qty",[197,716,717],{},"Rate",[197,719,720],{},"Amount",[206,722,723,737,750,763,775,787,802,818],{},[194,724,725,728,731,734],{},[211,726,727],{},"Web design services (June)",[211,729,730],{},"22 hrs",[211,732,733],{},"$85",[211,735,736],{},"$1,870.00",[194,738,739,744,746,748],{},[211,740,741],{},[39,742,743],{},"Reimbursable expenses",[211,745],{},[211,747],{},[211,749],{},[194,751,752,755,758,761],{},[211,753,754],{},"Stock photography licence (invoice #A-2231)",[211,756,757],{},"1",[211,759,760],{},"$79.00",[211,762,760],{},[194,764,765,768,770,773],{},[211,766,767],{},"Return train fare, London↔Bristol (12 Jun)",[211,769,757],{},[211,771,772],{},"$64.00",[211,774,772],{},[194,776,777,780,782,785],{},[211,778,779],{},"Subcontractor: copywriting (J. Okafor)",[211,781,757],{},[211,783,784],{},"$450.00",[211,786,784],{},[194,788,789,794,796,798],{},[211,790,791],{},[39,792,793],{},"Subtotal — services",[211,795],{},[211,797],{},[211,799,800],{},[39,801,736],{},[194,803,804,809,811,813],{},[211,805,806],{},[39,807,808],{},"Subtotal — expenses",[211,810],{},[211,812],{},[211,814,815],{},[39,816,817],{},"$593.00",[194,819,820,825,827,829],{},[211,821,822],{},[39,823,824],{},"Total",[211,826],{},[211,828],{},[211,830,831],{},[39,832,833],{},"$2,463.00",[16,835,836,839],{},[39,837,838],{},"Option B — a separate expenses invoice"," entirely, cross-referenced to the project. Useful when expenses are large or arrive on a different timeline than your fees, and when a client's accounts team codes reimbursements to a different budget.",[16,841,842],{},"Either way, name the specific supplier, date, and purpose on each line. \"Travel — $64\" is weak. \"Return train fare, London↔Bristol, 12 Jun client workshop — $64\" gets approved without a follow-up email. Attach the underlying receipts as a PDF; don't wait to be asked.",[16,844,845,846,850],{},"If you're building invoices by hand, the layout principles in ",[437,847,849],{"href":848},"\u002Fhow-to-make-an-invoice-in-excel-word-google-docs","how to make an invoice in Excel, Word or Google Docs"," apply here too — a clean expenses subtotal is just another block.",[11,852,854],{"id":853},"the-vat-and-sales-tax-part-people-get-wrong","The VAT and sales-tax part people get wrong",[16,856,857,858,861,862,473],{},"This is where recharging expenses gets genuinely technical, and the rules differ by tax and by country. Two concepts get confused constantly: ",[39,859,860],{},"recharges"," and ",[39,863,864],{},"disbursements",[121,866,868],{"id":867},"recharges-vs-disbursements-vat-registered-businesses","Recharges vs disbursements (VAT-registered businesses)",[16,870,871,872,875,876,879,880,883],{},"A ",[39,873,874],{},"recharge"," is a cost you incurred ",[137,877,878],{},"for your own business"," in order to deliver the service, which you then pass on. Your train fare to a client meeting is your cost — you bought the ticket, you travelled. When you recharge it, it becomes part of the consideration for your service, so in the UK and similar VAT systems you generally add VAT to it at your service rate, ",[137,881,882],{},"even if the original ticket was zero-rated or VAT-exempt",". That surprises people: a zero-rated train fare recharged to a client typically gets 20% VAT added because it's now part of your taxable supply.",[16,885,871,886,889,890,893],{},[39,887,888],{},"disbursement"," is a cost you paid ",[137,891,892],{},"as the client's agent"," — the goods or services were supplied to the client, not to you, and you merely handled the payment. A statutory fee (say, a companies-registry filing fee paid on the client's behalf) can qualify. Disbursements are passed on at exact cost with no VAT added by you, but they must meet strict conditions: the client received the supply, you were acting as their agent, and you show the cost separately. Getting this wrong means under- or over-charging VAT.",[16,895,896,897,901,902,906],{},"Practical takeaway for UK and EU-style VAT: most of what freelancers call \"expenses\" are actually recharges, not disbursements, so you add VAT. Read ",[437,898,900],{"href":899},"\u002Fuk-vat-invoices-explained","UK VAT invoices explained"," and, if you're near the threshold, ",[437,903,905],{"href":904},"\u002Fdo-i-need-to-register-for-vat","do I need to register for VAT",". Rules vary — confirm your specific situation with HMRC or an accountant.",[121,908,910],{"id":909},"us-sales-tax","US sales tax",[16,912,913,914,918],{},"Whether a reimbursed expense is taxable depends on the state and on whether the underlying item was taxable and how it's characterised. Reimbursed costs that are part of a bundled taxable service can be taxable; a separately stated pass-through of a non-taxable item may not be. There's no single national rule. The overview in ",[437,915,917],{"href":916},"\u002Fus-sales-tax-on-invoices","US sales tax on invoices"," is a starting point, but check your state.",[121,920,922],{"id":921},"canada-and-australia","Canada and Australia",[16,924,925,926,930,931,935],{},"For GST\u002FHST in Canada, recharged expenses generally follow the tax treatment of your overall supply; see ",[437,927,929],{"href":928},"\u002Fcanada-gst-hst-invoice-requirements","Canada GST\u002FHST invoice requirements",". In Australia, GST on reimbursements versus true disbursements follows a similar agent-vs-principal logic to the UK; a valid ",[437,932,934],{"href":933},"\u002Fwhat-is-a-tax-invoice-australia","tax invoice"," still needs the right GST breakdown.",[16,937,938,939,942,943,946],{},"One more trap: ",[39,940,941],{},"don't double-count VAT\u002FGST you've already reclaimed."," If you're VAT-registered and reclaimed the input tax on that £79 stock photo, you recharge the £79 net (pre-VAT) figure and add your own VAT on top. Recharging the VAT-inclusive amount ",[137,944,945],{},"and"," adding VAT again overcharges the client.",[11,948,950],{"id":949},"keep-the-receipts-and-keep-them-findable","Keep the receipts, and keep them findable",[16,952,953,954,473],{},"Every recharged cost needs a supporting document you can produce on demand: the supplier invoice, the ticket, the mileage log. Tax authorities can ask you to justify both the expense you claimed and the amount you recharged. Retention periods vary (commonly several years), so store them with the project. The practical mechanics are covered in ",[437,955,957],{"href":956},"\u002Fhow-long-to-keep-invoices-and-receipts","how long to keep invoices and receipts",[16,959,960],{},"A simple system: create a folder per project, drop every receipt in as you incur it, and log the date, supplier, amount, and whether tax was charged in a spreadsheet. When invoice day arrives the expenses block writes itself.",[11,962,964],{"id":963},"handling-the-awkward-cases","Handling the awkward cases",[80,966,967,973,982,993],{},[36,968,969,972],{},[39,970,971],{},"The client rejects an expense after the fact."," If it was under your approval threshold and inside the contract's categories, point to the clause. If it was over the threshold and you didn't get sign-off, you may have to eat it — which is exactly why the threshold exists.",[36,974,975,978,979,981],{},[39,976,977],{},"A subcontractor you're recharging."," You're the principal: you hired them, you pay them, you recharge the client. Their invoice is addressed to ",[137,980,139],{},", and you issue your own invoice to the client. Don't just forward the sub's invoice.",[36,983,984,987,988,992],{},[39,985,986],{},"Foreign-currency expenses on an overseas project."," Convert at the rate on the date you paid, note the rate, and be consistent. ",[437,989,991],{"href":990},"\u002Fhow-to-invoice-international-clients","Invoicing international clients"," covers the currency and payment side.",[36,994,995,998],{},[39,996,997],{},"Expenses that arrive after final payment."," Bill them promptly on a short-dated invoice rather than sitting on them. A late \"oh, and there's also £200 of expenses\" three months on reads as disorganised and gets queried.",[16,1000,1001],{},"Recharging expenses well is mostly about being boringly transparent: agree the rules in writing, spend inside the agreed limits, itemise clearly, attach the receipts, and apply the right tax treatment for your jurisdiction. Do that and expenses stop being a source of friction and become just another clean line on the invoice.",{"title":565,"searchDepth":566,"depth":566,"links":1003},[1004,1005,1006,1007,1008,1013,1014],{"id":601,"depth":569,"text":602},{"id":618,"depth":569,"text":619},{"id":664,"depth":569,"text":665},{"id":693,"depth":569,"text":694},{"id":853,"depth":569,"text":854,"children":1009},[1010,1011,1012],{"id":867,"depth":566,"text":868},{"id":909,"depth":566,"text":910},{"id":921,"depth":566,"text":922},{"id":949,"depth":569,"text":950},{"id":963,"depth":569,"text":964},"Invoicing Basics","2026-07-29","How to recharge travel, materials, software and subcontractor costs to clients, whether to add markup, and how VAT and sales-tax rules apply.",{},"\u002Fhow-to-bill-clients-for-expenses",{"title":596,"description":1017},{"loc":1019},"how-to-bill-clients-for-expenses","RpKUmFUK7kvh-_hOs2fJkgj3NKtNotmV5Fped0xpX-s",{"id":1025,"title":1026,"author":6,"body":1027,"category":1015,"date":1528,"dek":581,"description":1529,"extension":583,"featured":584,"meta":1530,"navigation":586,"path":1531,"readingTime":588,"seo":1532,"sitemap":1533,"stem":1534,"__hash__":1535},"content\u002Fwhat-is-progress-billing.md","What Is Progress Billing? How to Invoice a Project in Stages",{"type":8,"value":1028,"toc":1518},[1029,1033,1036,1039,1051,1055,1058,1078,1085,1091,1097,1100,1104,1107,1110,1248,1259,1263,1266,1283,1286,1289,1348,1351,1359,1363,1366,1372,1387,1393,1398,1401,1407,1413,1417,1420,1425,1433,1438,1458,1461,1465,1468,1505,1509,1512,1515],[11,1030,1032],{"id":1031},"getting-paid-before-the-project-ends","Getting paid before the project ends",[16,1034,1035],{},"A web build quoted at $18,000 takes four months. If you invoice once at the end, you're effectively lending the client the cost of a third of a year's work, absorbing every scope change and stall, and betting your cash flow on a single payment that may arrive 30 days after the final sign-off. That's month five before a dollar lands.",[16,1037,1038],{},"Progress billing fixes this. Instead of one invoice, you break the project into stages and bill for each as you complete it. The client pays as value is delivered; you fund the work as you go. It's the standard model in construction, engineering, and large creative or software projects, and it scales down neatly to a solo freelancer running a $6,000 branding job.",[16,1040,1041,1042,1045,1046,1050],{},"This is different from a one-off ",[437,1043,1044],{"href":455},"deposit invoice"," or a fixed monthly ",[437,1047,1049],{"href":1048},"\u002Frecurring-and-retainer-invoices","retainer",". A deposit is a single upfront payment. A retainer bills a recurring fee regardless of specific deliverables. Progress billing charges incrementally against measurable chunks of one large project as they're finished.",[11,1052,1054],{"id":1053},"how-progress-billing-actually-works","How progress billing actually works",[16,1056,1057],{},"Every progress-billed project rests on three decisions you make before you start:",[33,1059,1060,1066,1072],{},[36,1061,1062,1065],{},[39,1063,1064],{},"The total contract value."," The agreed price for the whole job (or a clear rate structure if it's time-and-materials).",[36,1067,1068,1071],{},[39,1069,1070],{},"The billing triggers."," What event releases each invoice, a calendar date, a completed milestone, or a percentage of work done.",[36,1073,1074,1077],{},[39,1075,1076],{},"The schedule of values."," A line-by-line breakdown showing how the total is split across stages.",[16,1079,1080,1081,1084],{},"Two broad methods exist for deciding ",[137,1082,1083],{},"when"," to bill:",[16,1086,1087,1090],{},[39,1088,1089],{},"Milestone billing."," You invoice when a defined deliverable is complete: \"homepage design approved,\" \"database migration signed off.\" Best when the work has clear, discrete stages. Clients like it because they're paying for something they can see.",[16,1092,1093,1096],{},[39,1094,1095],{},"Percentage-of-completion billing."," You invoice based on how much of the total work is finished, often assessed monthly. A builder might bill for 40% of a job at the end of month two. This suits long, continuous work where deliverables blur together. It requires an honest, defensible way to estimate \"percent complete,\" which is where disputes usually start.",[16,1098,1099],{},"Most small-business projects use milestones. They're concrete and hard to argue with.",[11,1101,1103],{"id":1102},"building-a-schedule-of-values","Building a schedule of values",[16,1105,1106],{},"The schedule of values is the backbone. It's a table, agreed in the contract, that both parties reference for the life of the project. Keep the number of stages sensible: too few and you're back to lump-sum risk, too many and you drown in admin.",[16,1108,1109],{},"Here's a schedule for that $18,000 website, split into five stages plus a deposit:",[188,1111,1112,1129],{},[191,1113,1114],{},[194,1115,1116,1119,1121,1124,1126],{},[197,1117,1118],{},"Stage",[197,1120,711],{},[197,1122,1123],{},"% of total",[197,1125,720],{},[197,1127,1128],{},"Trigger",[206,1130,1131,1148,1164,1179,1196,1211,1228],{},[194,1132,1133,1136,1139,1142,1145],{},[211,1134,1135],{},"0",[211,1137,1138],{},"Mobilisation deposit",[211,1140,1141],{},"20%",[211,1143,1144],{},"$3,600",[211,1146,1147],{},"On contract signing",[194,1149,1150,1152,1155,1158,1161],{},[211,1151,757],{},[211,1153,1154],{},"Discovery & sitemap approved",[211,1156,1157],{},"15%",[211,1159,1160],{},"$2,700",[211,1162,1163],{},"Client sign-off on IA",[194,1165,1166,1169,1172,1174,1176],{},[211,1167,1168],{},"2",[211,1170,1171],{},"Design mockups approved",[211,1173,1141],{},[211,1175,1144],{},[211,1177,1178],{},"Client sign-off on designs",[194,1180,1181,1184,1187,1190,1193],{},[211,1182,1183],{},"3",[211,1185,1186],{},"Development complete (staging)",[211,1188,1189],{},"25%",[211,1191,1192],{},"$4,500",[211,1194,1195],{},"Site live on staging server",[194,1197,1198,1201,1204,1206,1208],{},[211,1199,1200],{},"4",[211,1202,1203],{},"Testing, revisions, launch",[211,1205,1157],{},[211,1207,1160],{},[211,1209,1210],{},"Site live on production",[194,1212,1213,1216,1219,1222,1225],{},[211,1214,1215],{},"5",[211,1217,1218],{},"Retention release",[211,1220,1221],{},"5%",[211,1223,1224],{},"$900",[211,1226,1227],{},"30 days after launch, no defects",[194,1229,1230,1232,1236,1241,1246],{},[211,1231],{},[211,1233,1234],{},[39,1235,824],{},[211,1237,1238],{},[39,1239,1240],{},"100%",[211,1242,1243],{},[39,1244,1245],{},"$18,000",[211,1247],{},[16,1249,1250,1251,1254,1255,1258],{},"Notice stage 5. That's ",[39,1252,1253],{},"retainage"," (also called retention), a slice of the total held back until after final delivery to guarantee you fix defects. It's ingrained in construction, where 5–10% is typical, and it's increasingly reasonable for larger creative and software work. As the contractor being billed ",[137,1256,1257],{},"against",", you want retainage low and released quickly; as the party doing the work, you accept it because it reassures a nervous client. State the release condition precisely: \"5% retained, payable 30 days after production launch provided no critical defects remain open.\"",[11,1260,1262],{"id":1261},"what-goes-on-each-progress-invoice","What goes on each progress invoice",[16,1264,1265],{},"A progress invoice looks like a normal invoice with a few extra fields that show where this payment sits in the bigger picture. Every one should show:",[80,1267,1268,1271,1274,1277,1280],{},[36,1269,1270],{},"The overall contract value",[36,1272,1273],{},"This stage's amount (the \"current claim\")",[36,1275,1276],{},"Total billed to date, including this invoice",[36,1278,1279],{},"Total remaining after this invoice",[36,1281,1282],{},"Any retainage held",[16,1284,1285],{},"That running tally prevents the most common progress-billing argument: the client losing track of what they've already paid.",[16,1287,1288],{},"Here's how a stage 2 invoice might read:",[624,1290,1291,1297,1338,1345],{},[16,1292,1293,1296],{},[39,1294,1295],{},"Invoice #2026-034","\nProject: Website redesign — Contract value $18,000",[188,1298,1299,1308],{},[191,1300,1301],{},[194,1302,1303,1306],{},[197,1304,1305],{},"Line item",[197,1307,720],{},[206,1309,1310,1318,1326],{},[194,1311,1312,1315],{},[211,1313,1314],{},"Stage 2: Design mockups approved (20% of contract)",[211,1316,1317],{},"$3,600.00",[194,1319,1320,1323],{},[211,1321,1322],{},"Less retainage (5% of this claim)",[211,1324,1325],{},"–$180.00",[194,1327,1328,1333],{},[211,1329,1330],{},[39,1331,1332],{},"Amount due this invoice",[211,1334,1335],{},[39,1336,1337],{},"$3,420.00",[16,1339,1340,1341,1344],{},"Contract value: $18,000.00\nPreviously billed (stages 0–1): $6,300.00\nThis claim: $3,600.00\n",[39,1342,1343],{},"Billed to date: $9,900.00 (55%)","\nRetainage held to date: $495.00\nRemaining to bill: $8,100.00",[16,1346,1347],{},"Payment terms: Net 14. Work on stage 3 begins on receipt.",[16,1349,1350],{},"Whether you deduct retainage from each claim or hold it all in a final stage is a style choice; both are fine as long as the contract and the invoice math agree. Deducting a little from each claim (as above) is cleaner because the client always sees the running retention figure.",[16,1352,1353,1354,1358],{},"Number your invoices in a consistent sequence so the project's billing history is auditable. If you juggle several clients, see ",[437,1355,1357],{"href":1356},"\u002Finvoice-numbering-best-practices","invoice numbering best practices"," for a scheme that won't collapse under multiple projects.",[11,1360,1362],{"id":1361},"contract-wording-that-protects-you","Contract wording that protects you",[16,1364,1365],{},"Progress billing lives or dies by what's written before work starts. The schedule of values belongs in the signed contract or statement of work, not buried in an email. Include clauses covering:",[16,1367,1368,1371],{},[39,1369,1370],{},"The trigger definition."," Vague triggers cause disputes. \"Design phase complete\" invites argument; \"Client provides written approval of homepage and two interior page mockups via email or project tool\" does not.",[16,1373,1374,1377,1378,1382,1383,1386],{},[39,1375,1376],{},"Payment terms per stage."," Short terms suit staged work. Net 7 to Net 14 is common; some freelancers use ",[437,1379,1381],{"href":1380},"\u002Fdue-on-receipt-payment-terms","due on receipt"," for deposits and early stages. Whatever you pick, spell out your ",[437,1384,1385],{"href":492},"late fee"," policy too.",[16,1388,1389,1392],{},[39,1390,1391],{},"A stop-work clause."," The single most valuable line in a progress-billing contract:",[624,1394,1395],{},[16,1396,1397],{},"\"Work on the subsequent stage will not commence until payment for the preceding stage has been received in full. Timelines extend automatically by any period of delayed payment.\"",[16,1399,1400],{},"This turns your invoice into a gate. No payment, no progress. It's the natural leverage staged billing gives you, and it beats chasing an $18,000 balance at the end.",[16,1402,1403,1406],{},[39,1404,1405],{},"Scope-change handling."," When the client adds work mid-project, don't quietly absorb it into an existing stage. Issue a change order that adjusts the contract value and, if needed, adds a stage. Revised schedule of values, signed, then carry on.",[16,1408,1409,1412],{},[39,1410,1411],{},"Deposit and retainage terms."," State the deposit amount, whether it's refundable, and how it's applied (usually credited against stage 0 or spread across the first stages). State the retainage percentage and its precise release condition.",[11,1414,1416],{"id":1415},"a-worked-cash-flow-comparison","A worked cash-flow comparison",[16,1418,1419],{},"The point of all this is timing. Same $18,000 project, two approaches:",[16,1421,1422],{},[39,1423,1424],{},"Lump-sum, Net 30, invoiced at completion (month 4):",[80,1426,1427,1430],{},[36,1428,1429],{},"Cash in: $0 until roughly day 150",[36,1431,1432],{},"You self-fund four months of work",[16,1434,1435],{},[39,1436,1437],{},"Progress-billed against the schedule above:",[80,1439,1440,1443,1446,1449,1452,1455],{},[36,1441,1442],{},"Month 0: $3,600 deposit",[36,1444,1445],{},"Month 1: $2,700 (stage 1)",[36,1447,1448],{},"Month 2: $3,420 (stage 2, net of retainage)",[36,1450,1451],{},"Month 3: $4,275 (stage 3, net of retainage)",[36,1453,1454],{},"Month 4: $2,565 (stage 4, net of retainage)",[36,1456,1457],{},"Month 5: $2,340 (stage 5 + accumulated retainage $900)",[16,1459,1460],{},"By the end of month 2 you've collected $9,720 on a project you're only a bit over halfway through delivering. That's the difference between a healthy freelance business and one perpetually one late invoice away from trouble.",[11,1462,1464],{"id":1463},"tax-and-record-keeping-notes","Tax and record-keeping notes",[16,1466,1467],{},"A few things to get right, and rules vary by jurisdiction, so confirm with your tax authority or an accountant:",[80,1469,1470,1490,1496],{},[36,1471,1472,1475,1476,1478,1479,1481,1482,1485,1486,1489],{},[39,1473,1474],{},"When to recognise income and charge sales tax\u002FVAT"," usually depends on when each invoice is issued or paid, not on when the whole project finishes. If you're VAT-registered in the UK, each progress invoice is generally a tax point in its own right; see ",[437,1477,900],{"href":899},". US sales tax on services varies by state, covered in ",[437,1480,917],{"href":916},". Canadian GST\u002FHST has its own ",[437,1483,1484],{"href":928},"invoice requirements",", and Australian ",[437,1487,1488],{"href":933},"tax invoices"," have set fields.",[36,1491,1492,1495],{},[39,1493,1494],{},"Deposits can be treated differently from progress claims"," for tax purposes in some jurisdictions. Don't assume they're the same.",[36,1497,1498,1501,1502,1504],{},[39,1499,1500],{},"Keep every progress invoice, change order, and sign-off email"," for the whole project and beyond. Guidance on ",[437,1503,957],{"href":956}," applies here.",[11,1506,1508],{"id":1507},"when-progress-billing-isnt-worth-it","When progress billing isn't worth it",[16,1510,1511],{},"Skip it for anything short or small. A $900 logo delivered in a week doesn't need five invoices, take a deposit and bill the balance. Progress billing carries admin overhead: more invoices, more approvals, more tracking. The break-even point is roughly a project long enough or large enough that carrying the full cost to completion would strain your cash or your nerves.",[16,1513,1514],{},"It also demands a client who signs a proper contract and approves stages promptly. If sign-offs are the bottleneck, add a clause deeming a stage approved if the client doesn't respond within, say, five business days. Otherwise your carefully staged cash flow stalls on someone else's inbox.",[16,1516,1517],{},"Structure the stages, define the triggers in writing, and let each paid invoice unlock the next slice of work. The project funds itself, and you never carry more risk than the current stage.",{"title":565,"searchDepth":566,"depth":566,"links":1519},[1520,1521,1522,1523,1524,1525,1526,1527],{"id":1031,"depth":569,"text":1032},{"id":1053,"depth":569,"text":1054},{"id":1102,"depth":569,"text":1103},{"id":1261,"depth":569,"text":1262},{"id":1361,"depth":569,"text":1362},{"id":1415,"depth":569,"text":1416},{"id":1463,"depth":569,"text":1464},{"id":1507,"depth":569,"text":1508},"2026-07-27","A practical guide to milestone and staged invoicing for freelancers and contractors, covering deposits, progress claims, retainage, and sample wording.",{},"\u002Fwhat-is-progress-billing",{"title":1026,"description":1529},{"loc":1531},"what-is-progress-billing","1f7Wj81KqhhKD9NyCFT0w5kd8bObLSynWMtfQE4jWeY",1785314448230]