As a contractor, you juggle every aspect of your business every day. Something that you never want to drop is invoicing.
A strong invoicing process is important to ensure you get paid on time and maintain cash flow. To set you up for success, this article will guide you through how to invoice as a contractor by explaining:
- What invoicing for contractors means.
- What to include when drafting a contractor invoice.
- How to write an effective invoice.
Plus, you’ll get some tips on how automation can transform your invoicing for the better.
What is invoicing for contractors?
In order to understand how to invoice as a contractor, it’s important to go over what invoicing for contractors means.
Invoicing for contractors is the process of asking customers for payment after you complete a job. An invoice contains an itemized list of services done and how much each service costs, with a total amount due at the end.
Why is invoicing important for contractors?
An invoice means that a contractor is owed money for work performed. You can’t receive payment until your customer receives an invoice. That’s why it’s important to get your invoices to your customers as soon as a project is complete.
Invoices also keep you organized and allow you to track cash flow. They let you know how much cash you currently have and how much income you can expect once outstanding invoices are paid.
Finally, an invoice is a document that confirms that the work was done and tells the customer how to make payments, including the different payment methods you accept (i.e., cash, credit card, PayPal, etc.). This makes getting paid for projects easier and also makes for a better customer experience. It is also a formal document you can reference in the case of litigation or a dispute.
With this information in mind, let’s see who can use invoicing for contractors.
Who can use invoicing for contractors?
Invoicing for contractors applies to a variety of companies and isn’t just reserved for small businesses. Companies of every size using various business models all have invoicing as part of their payment process.
Sole proprietorships and freelancers are the easiest and most common structure used to start a business and use invoices regularly for payment processing. However, companies using other business models use invoicing as well. For example:
Essentially, any business that acts as a contractor — in any capacity — needs to know how to invoice as a contractor.
Now, let’s take a look at what to include when structuring a contractor invoice.
What to include in a contractor invoice?
It’s important to include all relevant information in an invoice to simplify payment for your customers. Formatting the invoice professionally ensures that you never miss any details in your invoice, reducing the amount of delayed payments you receive.
For example, drawing from experience, adding contact information and inserting invoice number and date both significantly improve your chances of getting paid on time.
For guidance, here are the fields that must be in every outgoing invoice.
Your business details should be at the top of every invoice. This should include:
- Company name.
- Contact information (email, phone number, etc.).
- Contractor’s name.
- Brand elements like a company logo.
Incorporating contractor’s licensing details is a good option here too, as it demonstrates your level of expertise and professionalism.
Date of invoice
The invoice date is a small but crucial detail.
This is because the invoice date allows you to track whether an invoice is paid on time or late. Seeing a send date and a due date on an invoice keeps your customer accountable.
What’s more, it also lets you keep a record of when you complete jobs, which makes tasks like analyzing data and accounting much simpler.
You must ensure that you send the right invoice to the right person, and that requires you to have your customer’s name and information on the invoice itself.
Always include the following customer details in your invoice:
- Phone number.
- Location of work being done (if applicable).
One of the most common contractor invoicing mistakes for new tradespeople is forgetting to include an invoice number.
Just like the date, invoice numbers help you keep track of your invoices. If ever a customer calls you to discuss their invoice, this number makes it easy to find the relevant document on your side.
For this reason, your invoice numbers should be consistent and you should have a system in place.
Itemized list of services and price breakdown
Knowing how to invoice as a contractor involves detailing provided services and calculating the total amount of hours spent on each task.
The best method to break down your services on an invoice is by preparing an itemized list, as it makes compiling billable hours and calculating total costs much easier. You can do this easily by creating an invoice template in Excel.
Note that outlining project-specific details is also necessary here as you should be adjusting invoices based on changes in the project scope.
Documenting payment terms is also crucial in this step so your customers know exactly how and when to pay you.
This way, your clients see exactly what they’re paying for and how much each service or product costs.
Better yet, it’s easier for you to track the work when it’s presented in this way, meaning that you’re less likely to forget an item.
When learning how to invoice as a contractor, you must also determine how you want to charge for taxes.
Some contractors like to build in the price for taxes in their final total, while others prefer presenting taxes as their own line item.
Either way works as long as you’re including tax calculations in your invoice and remembering to pay them when the time comes.
How to write invoice as a contractor
Now that you know what to include in your invoice, the next step in learning how to invoice as a contractor is knowing how to write the actual invoice.
To write an invoice, follow these 5 steps:
- Identify the document as an invoice: Make sure to write the word “invoice” somewhere at the top of the document so your customer knows exactly what it is.
- Include our business information: If your business information isn’t already in an invoice template, then make sure to add it in a header.
- Include your client’s contact details: Make sure that your customer’s details are accurate, especially their name and email address for the delivery of the invoice.
- Provide details of your service: Be as detailed as possible so that your customer knows exactly what’s been done and what they’re paying for.
- Provide the amount due and payment terms: The final amount should be in bold, and payment methods should be clear to allow for a smooth invoicing process.
Note: Adding a personal message or thank you note improves your customer relationships and encourages on-time payments. That said, attaching supporting documents leads to confusion and gives your customers more work, so try to keep everything in one file.
When broken down into these steps, learning how to invoice as a contractor becomes much simpler. After finalizing your invoice, the only task step left is submitting the invoice to the client.
But what if you could make the process even easier? Method makes that a reality.
Unleash the power of automated invoicing with Method
If you aren’t using automation software for your business processes — including invoicing — you’re behind your competition. Luckily, Method can help you catch up and even lead the way.
With Method, you can create invoices from previous documents such as estimates and construction agreements with ease. Not to mention, tracking invoice statuses and marking paid invoices is easy and convenient. This ensures consistency and saves you time on manual data entry, benefitting every department of your business.
Method also offers a variety of customizable templates that you can make your own to simplify your billing process. Using and designing these templates doesn’t require any coding or graphic design experience — all you have to do is drag and drop.
Sending invoices to your customer directly from Method is also possible thanks to a variety of email integrations. You can even send automated reminders following up on unpaid invoices to give customers a gentle nudge.
What’s more, with a two-way QuickBooks sync, your accounting is always up to date with your invoicing and your entire team stays on the same page.
To recap, knowing how to invoice as a contractor can make or break your business. The good news is that you set yourself up for success when you:
- Have a system.
- Know what to include in your invoices.
- Remain consistent.
If you want to truly strengthen your invoicing, you should consider implementing automation into your process. Whether you use templates or software, you’ll save valuable time on invoices so that you can get paid faster.
How to invoice as a contractor FAQs
What should I include in a contractor invoice?
Here is the basic information you should include in a contractor invoice:
- Your business name and contact information.
- Customer name and contact information.
- Project details.
- Itemized list of services.
- Final total.
Don’t forget to include additional fees such as permits and insurance, if applicable.
How can I fill out a contractor invoice?
The most common way to fill out a contractor invoice is manually, but that isn’t the simplest way.
Depending on your business and offerings, the best way to fill out a contractor invoice is to take the information from a previous agreement or estimate you created for the same client.
This document should already have the relevant contact information and project description, so all that’s left to do is tweak it and add the final total. This process can be done automatically with the right software.
How can I write my own invoice?
You have several options to write your own invoice including using Excel or Google Sheets as well as downloading a template.
However, when learning how to invoice as a contractor, you should consider generating an invoice based off of a template to save time and ensure consistency throughout the process.
Ready to automate your contractor invoices? Start your free trial of Method today!
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