How to invoice as a contractor or subcontractor

Mastering the art of creating an invoice is important for any contractor. It ensures you get paid on time and keeps your small business running smoothly. Whether you’re an independent contractor, subcontractor, or run a small contracting business, it’s important to send invoices that are clear and professional.

This guide will equip you with the knowledge on how to send a contractor invoice and the common mistakes to avoid so you can streamline your invoicing process.

Understanding contractor invoicing requirements

Before you get started on a project, the first step is to send out an estimate or “quote” so that your client is aware of how much the project will cost and can decide if they want to move forward or not. You can easily do this with Bookipi’s free contractor estimate templates. After your client agrees on the quote, it may be a good idea to have your client sign a contract so that you’re protected. The contract should outline everything you agreed to include in the project, when they can expect the project to be finished, how many revisions are included if they’re required, as well as the agreed upon project cost. 

After the project is completed, the next step is to send out a sales invoice so you can get paid. Sales invoices should be professional, accurate, and clearly outline all of the following information to make sure you get paid on time.

Here are the key things to include in your sales invoice format:

1. Your contact and business information 

Include your business name, address, phone number, and email address. This ensures your client knows exactly who to contact with any questions about the invoice or your services. 

2. Your client’s information

Include your client’s company name, contact person, address and phone number. This is important to ensure the invoice reaches the right person who can process your payment.

3. Invoice number

Choose a unique invoice number for easy reference and record-keeping. Invoice numbers help you track your invoices and payments, and allow your client to easily reference a specific invoice or project.

4. Dates

Include the dates your services were provided and the date the invoice was issued. This helps clarify what the invoice covers which is especially important if you offer the same service on different occasions. 

5. Description of services

A detailed description of the services included helps your client understand exactly what they’re paying for. Break down complex projects into itemized tasks for clarity. This is also helpful for your own reference if you need to track past projects down the line. 

6. Payment due date

Very clearly state the date by which your client needs to settle the invoice. A clear due date avoids confusion and encourages prompt payments. You can even consider offering an early payment discount to incentivize quick payment.

7. Rate and hours

If you charge an hourly rate, track the hours you worked accurately and list the number of hours you worked on the project. Not only is billing accurately fair practice, it also helps you get an idea of how much time you can expect to spend on future projects which will make quoting easier. For flat-rate projects, simply state the agreed-upon project fee. 

8. Tax

Note any taxes that may apply. Depending on your business structure, you may need to lodge sales tax or other taxes. Consult with a tax advisor for specific guidance.

9. Payment terms

Make sure to note your accepted payment methods (bank transfer, credit card, etc.) and any deposit requirements. Consider offering multiple secure payment options for your client’s convenience.

10. Late payment policy

Consider including a late fee policy to discourage late payments. A late payment policy protects your cash flow and encourages on-time payments. Include the specific late fee amount, and how it will be charged. 

Bookipi offers a free contractor invoice template to help get you started. Bookipi’s invoicing app helps contractors process invoices easily which can be especially helpful when managing repeat clients and multiple projects.

Contractor invoicing mistakes to avoid

Here are some common invoicing mistakes contractors make and how to avoid them:

Forgetting to track your hours

This can lead to undercharging for your services. All contractors should have a system for tracking time spent on a project. You might consider using a time tracking app, a spreadsheet with hourly logs, or paper timesheets filled out at the end of each workday. 

Delay in sending invoices

Get into a habit of sending out your invoices soon after finishing a project or service. The sooner you invoice, the sooner you get paid. Make sending invoices part of your project completion process – include it in your final project walk-through with the client or set up automated reminders in your accounting software to send invoices on the due date.

Incomplete invoice

Make sure your invoice includes all the necessary details listed above so your client has all of the information they need to pay you on time. Create a checklist of essential invoice details and use it every time you create an invoice. This’ll help you avoid missing crucial information that could hold up payment.

Inconsistent invoice format

Maintain a consistent and professional format for all of your invoices. This builds trust with your clients and makes it easier for them to understand your invoices and process payments quickly. Put together a professional consultant invoice template that includes your logo, contact information, and all the necessary invoice details. Use consistent formatting (fonts, colors, layout) for all your invoices that’s inline with your branding. Bookipi has free contractor invoice templates that you can use.

No payment terms

Not including payment terms can lead to confusion and payment delays. Clearly state the payment due date (e.g. pay within 30 days) and list all the payment methods you accept (e.g., bank transfer, credit card, check). Consider offering a discount for early payment to encourage quick payment. 

No follow up on late payments

If a client has an outstanding invoice past the payment due date, don’t be afraid to ask for payment politely but firmly. Early intervention can prevent bad debt and set clear expectations with your clients. If you don’t have one already, work out a late payment follow-up process. This could start with sending a friendly reminder email a few days after the due date. If they still haven’t paid after a few days, consider following up with a more assertive call or email. Remember to stay professional and courteous while emphasizing the importance of timely payments for your business.

Tips to Master Invoicing for Contractor Work

Here are some extra tips to help you master invoicing as a contractor:

Use an invoicing software

Simplify the invoicing process by using a user-friendly invoicing app like Bookipi. Bookipi can streamline your invoicing process in several ways by:

• Automating tasks: Save time by automating repetitive tasks like generating invoices, calculating totals, and sending them to clients.
• Creating professional invoices: Bookipi has pre-designed templates that you can customize with your logo and branding. 
• Managing client information: You can store client contact details, project history, and invoicing preferences within the software which means you don’t need to manually enter this information each time.
• Tracking payments: Bookipi monitors outstanding invoices and overdue payments, making it easy for you to follow up on late payments.

Accept multiple payment methods

Offer a variety of secure payment options to make it convenient for your clients to pay you. This can include:

• • Bank transfer: A popular and secure option for electronic payments directly to your business bank account.
  • Credit card: While credit card processing fees may apply, some clients prefer the convenience and security of credit card payments.

• Online payment: Consider using secure online payment platforms like PayPal or Stripe that integrate with invoicing software, allowing clients to pay electronically with a credit card or bank transfer.

• Check: While less common, some clients may prefer to pay by check. Be clear about your check acceptance policy, including any waiting periods for checks to clear.

Maintain good records

Keep copies of all your invoices and project documentation for your own accounting and tax purposes. At a bare minimum you should keep:

• Electronic copies of invoices: Keep digital copies of your invoices in a secure place so that you can easily reference them down the line. 

• Project documentation: Keep any project documentation like contracts, emails, and receipts for materials purchased. You may need to refer to these during tax time, or use them as evidence if any disputes arise. 

By following these contractor invoicing tips and taking advantage of Bookipi’s contractor invoicing templates, you can make sure your invoices are clear, professional, and get you paid on time. Found this helpful? Check out Bookipi’s other small business bookkeeping tips.