What is Self-Billing?

Discover why self-billing is the future of invoicing and how it can simplify your processes.

What is Self-Billing or Reversed Billing?

In the third quarter of 2022, 1.2 million freelancers were active in the Netherlands, according to CBS data. Freelancers are often the perfect solution for businesses facing staffing shortages. However, onboarding new freelancers, tracking hours, and managing accounts receivable can create significant administrative challenges.

Fortunately, with the right self-billing tools, you can solve these issues quickly and easily.

Self-billing is a process where, as a client, you generate an invoice on behalf of your supplier (such as freelancers working for you). Essentially, you create and send the invoice for the services they’ve provided.

While this might sound counterintuitive, it’s highly convenient for both you and the freelancer. Since the units (like hours worked) and prices are agreed upon in advance, all you need to do is invoice for the services delivered on the freelancer’s behalf.

Once the invoice is generated, you send it directly to the freelancer for approval. Once they agree, your administration is in order, and you can proceed with payment.

Benefits of Self-Billing for Clients:

• Standardized invoices: All invoices come in the same format, allowing your financial system to automatically recognize and process them.

• Reduced risk of fraud: Fake invoices become easy to spot.

• Fewer errors: Since you manage the invoicing process, you reduce the risk of mistakes, leading to fewer credit notes and corrections.

• Clear project oversight: You can easily monitor costs on a project basis by keeping track of all invoices.

Benefits for Freelancers:

• Simplified administration: Freelancers no longer need to create and send invoices.

• Streamlined accounts receivable: Since the client (you) approves the services before invoicing, managing accounts receivable becomes much easier for freelancers.

Who Should Use Self-Billing?

Organizations that work primarily with freelancers can benefit the most from self-billing. This includes healthcare providers, hospitality businesses, retailers, staffing agencies, construction companies, and smaller businesses that hire flexible experts.

Additionally, freelancer platforms are increasingly using self-billing. These platforms, often focused on specific industries or expertise areas, can make bulk agreements with freelancers and generate weekly or monthly invoices using self-billing.

Even smaller businesses that work with multiple contractors for specialized products or services can benefit from self-billing. It keeps your administration up-to-date and provides clear insight into who your contractors are and what they deliver.

Important Rules to Follow for Self-Billing

There are a few key rules to keep in mind when using self-billing. Failure to comply with these could result in problems with tax authorities.

• "Invoice issued by the client": Always include this phrase on the invoice, and ensure there’s a prior agreement with your freelancer that invoices will be handled via self-billing.

• VAT responsibility: Freelancers remain responsible for paying VAT.

• Errors in the invoice: If you make a mistake, the invoice is invalid. It’s important that the freelancer reports errors in a timely manner.

• Correcting mistakes: If there’s an error, either the client (you) or the freelancer can issue a corrected invoice.

• Freelancer’s responsibility: Even though you generate the invoice, the freelancer is ultimately responsible for ensuring the invoice is correct. It’s advisable to clarify this from the start.While self-billing offers many advantages, it can still be a complex administrative process. Fortunately, with the right tools, you can automate much of it.

Automate the Entire Self-Billing Process

To reduce the administrative burden of onboarding, managing, and paying freelancers, Finqle offers solutions that allow you to automate the entire process. From onboarding to instant payments and everything in between, Finqle has you covered.

Self-Billing with Finqle: our existing relationships, agreements, and contracts remain unchanged, but they can be easily transitioned to Finqle’s system.In the self-billing process, you continue to act as the debtor, while freelancers are treated as merchants.The platform is branded with your logo, making it recognizable for freelancers.The invoicing process is handled by Finqle, so you no longer need to worry about the administrative side.Any questions regarding invoicing or payments are managed by Finqle.

Once invoices are approved, Finqle ensures payment within a few minutes through factoring (accounts receivable financing).

You receive a single consolidated invoice per week for all freelancers involved in a project, allowing you to make one payment to Finqle instead of multiple payments to different freelancers.

A contract module allows you to easily create, track, and manage contracts, giving you an overview and enabling simple termination or renewal when needed.

By using Finqle’s automated self-billing system, you can reduce the time spent on managing freelancer payments and focus on growing your business.