Invoicing is an essential part of any business. Most likely, any job you’ve ever had involved invoices in some way or another – even if all you ever saw at the end of the day was your paycheck. If you’ve never owned your own business, or have never worked with accounting, your first question may be “What is an invoice, and do I really need them?”
Simply put: an invoice is an itemized list of services or purchases and the amount owed. The customer may call this their “bill”. Once the invoice/bill is marked as “paid”, the customer may now call it a “receipt”.
As a nanny, invoices serve as necessary, legal documents that can be used to show how much money you are owed for services performed. Additionally, invoices are an easy way to receive payments, and give both you and the parents a document for personal and business taxes.
Let’s get into some of the nitty gritty of setting up, using, and sending invoices for your nanny business.
Don’t get paid in cash
“It is important to have a trail of proof of that communication. You need to be able to show the parents what has been communicated between you and them and anyone else involved. Part of your responsibility [communication-wise, as a nanny,] is to keep track of this proof.”
Part of that communication involves what you discussed concerning payments and rates. Not only do you tell parents what you will charge when you are first getting started, but you continue to reiterate this information to them through your invoice. They should see:
- how many hours you worked
- what your hourly rate was
- charges you made in their behalf
- any notes you want to leave them through the invoice
By sending an electronic invoice you, as the business owner, get to see when and if the invoice was paid. This leads us to an important point: if possible, Don’t get paid in cash. There is nothing inherently wrong with getting paid cash. It’s dependable. You don’t have to worry about a check bouncing. However, there are a few setbacks:
- You don’t inherently get that “trail of proof”
- You have to do extra work (bringing it to the bank, creating receipts and marking them as paid, etc)
- If the parents can’t pay you the day you’re at work, or if your schedule changes, you have to wait until the next time you are at work to get paid
- It’s much easier for either you or the parents to miscount the money owed, ending up with you getting underpaid (or overpaid, which can be just as bad)
You can eliminate all of these problems by starting out with electronic invoicing services.
“But I’m young and just getting started. I don’t have any money to invest in expensive accounting software!”
Lucky for you, all of what I use for my invoices is FREE. I personally use Wave Invoicing and the Cash App (Bonus: if you sign up with the link I just provided, we both get $5!). Both of these services are free and super easy to use. Cash app is also useful because it deposits money straight into your bank account. This gives you bank statements that you can keep for taxes.
Get a bank account
Next, you need to have a bank account. This is something you’re going to need for handling payments electronically with something like Cash App. Bank accounts are very easy to set up, and again, they’re basically free. Even so, you may benefit from looking into a credit union as an alternative to your traditional banks. These are what I’ve used most of my life, and I’ve found that they often have better interest rates and are easier to work with. But, of course, this will vary depending on where you live and the options in your area. I’d encourage you to look at local options and ask friends and family what they use.
Pro Tip: we keep all of our business expenses on a separate credit card that is only used for our nanny business. This makes bookkeeping and invoicing much simpler. Doing things this way, I don’t have to pour over hundreds of personal purchases to find the few business expenses in my bank statements.
How to set up an invoice
It’s true that invoicing is a part of accounting – which is a complex world. It is also true that accounting involves a lot of math, dates, and records. What all of this does not mean is that your invoice needs to be complicated. In fact, setting up your invoice is very easy, especially with software like Wave. Using Wave, you can even send invoices, using your phone, in just seconds. It is important, however, that you take some time when getting started with a new client to set your invoice up right. An important point to remember is to keep things as clear and simple as possible.
Here are the key features you’ll need:
- Date the invoice was sent
- Date the invoice must be paid by
- Who the invoice is to be paid to
- The client’s name
- Description of the services paid for:
- Days worked
- Hours worked
- Hourly rates
- Additional expenses
- House/Family purchases
In Wave, you’ll be prompted for most of this information, making the process fairly simple.
Leave a Spot for Feedback
Before, in the Nanny/Parent Cooperation article, I repeatedly mentioned in passing that you can communicate through your invoice. However, I didn’t go into detail. Let’s take a look at how you can actually implement such a system, and how you could get feedback through avenues other than your invoices.
A multi-part series that examines different aspects of communication in a nanny’s career. The series starts by taking a look at the importance of cooperation between the nanny and the parents. Read more.
This is something that many companies do, they ask clients for feedback about their services directly in their invoice. Perhaps the invoice is in an email and it suggests that you reply to the email with your feedback, or you get a link to a survey. As a nanny, you can do this too. Often, as parents are paying you, they feel more at liberty to speak their mind about something – which is a good thing. Whatever you do, don’t obscure the spot that they can leave feedback, and make sure to read any feedback they give you. Don’t give them the option to communicate with you through your invoice if you’re not going to read it.
Another option would be to use the invoice comments as the kid’s daily log. First, parents will see what you did with the kids that day. For example:
- You took them to the library
- You went on a walk
- Took a nap
After you left, you mark that in your invoice. The parent’s read that and notice the baby slept great that night. So, the parents leave a comment saying “please do that schedule again!” On the other hand, maybe you do something else.
- You lounge around the house all day
- Play pretend for a bit
- Watch movies
Basically, you have a lazy day. Later, the parents noticed that the kid was restless that night. They can make a note of that, telling you that they would appreciate less screen time. They’ll notice patterns with their kids based on what is going on in their lives. Leaving a spot on the invoice for commenting and feedback is a really smart way for both of you to communicate about the kids. Remember, the parents may or may not be great at checking daily logs, but they will be looking at your invoices if they expect you to keep working with them.
Be firm but friendly – Be clear. Be on time.
Remember, you are not watching their children out of the kindness of your heart, you’re running a business. Though you may love the kids, the parents, and your job you need to make money regularly. Sometimes you will be shorted money, not reimbursed for expenses, paid late, or otherwise inconvenienced. In circumstances like these, it is important that you remain calm, but communicate with them in a firm, yet friendly manner.
For example, let me again quote a previous article:
After sending an invoice and receiving a payment, compare those two numbers. If you notice you weren’t paid enough, double check your invoice math. If your math is right, be kind, but firm. Try sending a quick text, “I just got the payment. Thanks for being on time. I did notice a discrepancy of [x] dollars do you mind shooting that over as soon as possible?”
In that example, we don’t beat around the bush, but we are also not overly blunt. We get to the point in a friendly manner. You can basically use this structure for any such issues you need to resolve.
- Compliment them “I just got the payment. Thanks for being on time.”
- Point out the issue without blaming anyone “I did notice a discrepancy of …”
- Offer the solution “do you mind sending me that as soon as possible?”
One point to keep in mind that if you expect the parents to act professionally concerning invoices, you need to be professional as well. This involves communicating clearly, and punctually.
“Families want you to be professional, someone who respects [them] and their time” – Expectations, Boundaries, and Limits.
Receipts…Remember the taxes
When it comes to owning a business, honesty is important. This means paying taxes honestly when the time comes… and it will. To make this process as simple and pain free as possible, keep records of everything.
Keeping records can be easy, simple and may only take a few seconds or minutes a day.
If you are using all of the advice in this article – which will make things easier on you – you will already have most of what you need. Your invoices serve as records for yourself, never throw these away. In fact, most of these can be kept digitally for an indefinite amount of time. These can be easily printed off as needed.
In hand with your invoices are records of payments made to you. This is how you can keep accurate records of your income. Additionally, this doubles as a receipt for the parents.
Part of what you do as a nanny is making the parent’s lives easier, and you can add to that service by giving them detailed receipts.
The part we haven’t touched on yet is extra purchases. These might be expenses that you need to charge the parents for, or it might be things that you need to run your business:
- Software services
- Office supplies
- A portion of your internet expenses
- Work clothes
- Nanny printouts
- Items for your nanny bag
Keep receipts for both kinds of purchases. Additionally, if you are using a separate credit card for business expenses, that can serve as an accurate record when it comes to doing your taxes.
If you haven’t already, go ahead and read the article Handling Payments as a Nanny. It serves as a sort of precursor to this article that we released a few months ago.
The business side of things can be complicated. If you have any questions about invoices, taxes (for your business) or have specific situations come up that you don’t know what to do with, contact me. I want to help you keep doing the thing you love oh so simply.