How to Invoice as a Contractor? [Ultimate Guide]

How to Bill as a Contractor?

It would surely have been much easier if there was any standardized format for billing clients. Then it will be just a matter of a few taps:

• Get those standardized formats downloaded.
• Enter the client name.
• Provide brief description of the services charged.
• Specify the final amount.

However, it’s not so. There is no-one-size-fits-all solution. Each contractor has different billing requirements, ways, and methods to charge. So, they need to create personalized invoices that best fits their requirements and help them get paid in timely manner.

To help you get a better understanding, let’s take two examples.

1. In some projects, contractors are required to get charged half of their total fees at the inception of the project and the other half at the delivery stage. On the contrary, in some projects, they are supposed to get paid at a mutually agreed timeline.

2. Apart from this, there are even several ways to levy charges. Some of them charge on a flat rate basis, some on hourly basis while others use the percentage rate based on project completion.

Though contracting requirements vary from project to project, there are some common points that are must have while billing. Whether you are creating handwritten invoices or trying free invoicing templates, here are some of the essentials that you cannot afford to skip when including in your invoice.

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What Should be Included in Your Contract Invoice?

Here is the list of all the essential details that will help you generate professional invoices. Go through this detailed section to streamline your invoicing process.

1. Label the document as an invoice

   The first thing to do while creating an invoice is to identify the document as an invoice. It should either be written clearly on the top of the document or you may use a large bold font to highlight it as an invoice. The clear identification of the document as invoice will reflect the purpose of the document and expected payment to be made within.

2. Include business details

   Your business details are the foundational element in an invoice. Including company name, company logo, phone number and email address will help your clients to easily contact you. This will give you an opportunity to reinforce professionalism and brand identity, while facilitating clear communication with your clients.

3. Add your client’s contact details

   Moving further, add your client details in the contractor invoice. This can include the client’s name, their company name (if applicable), phone number and email address. Including these details is significant for maintaining transparency between both the parties. This practice will further ensure that invoices reach to the intended recipient in the right department.

4. Assign an invoice number

   Invoices, if not managed sequentially, can lead to the potential confusion when referring to them in future. Hence, it is important to assign a unique invoice number for easy recognition. This consistent numbering pattern will help you and your client stay organised. It will also help both the parties to easily track the invoices without any confusion or dispute over specific transactions.

5. Mention invoice date and due date

   Clear and explicit timelines is another important factor in the invoicing process. Mentioning the date when invoice generated, along with the due date for making payment, is essential. This not only establishes the payment expectations from the client but also helps contractors to manage cash flow, ensuring timely payment.

6. Provide details of the services provided

   Create a comprehensive list of all the services provided, a brief description of each of them, quantities, and the rates charged. Applicable tax rates or discounts, if any should also be entered. The objective here should be to provide clarity and tramspacery to the client about what they are getting billed for.

7. Calculate the total amount due

   Naturally, the next step is pretty obvious: to sum up the cost of all the services rendered, and accurately state the figure on the invoice. If there are any applicable tax rates, make sure that they are itemized separately for transparency. The total amount is the ultimate purpose for which invoice is made. Hence, it should be precisely stated.

8. Add payment terms

   Any additional payment information or notes that you require your clients to know should be added here. This can include any rules of engagement for settling the invoice, accepted payment method, payment frequency, or any late fees or penalties. By clearly defining contractor payment terms, the chance of delayed or incorrect payments get minimized.

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6 Mistakes to Avoid as an Independent Contractor while Invoicing

Now that you are aware of how to create an effective contract invoice, let’s discuss few common contractor invoicing mistakes that you should avoid.

1. Inconsistent invoice formatting:

   Follow a consistent invoicing format to enhance the professional reputation before your clients. A unified, polished look of contractor invoices will reflect your attention to details and dedication towards enhancing client relationship.

2. Delay in sending invoices:

   Delay in sending invoices, lead to unnecessary payment delays and unwanted cash flow issues. Sending invoices at an agreed time interval or project milestones ensure prompt payment from the clients.

3. Forget to track billable hours:

   Right from the first task you initiate, to the day you deliver the project work completion papers, tracking the hours is essential. If you forgot to keep a track of your billable hours, you will not be able to charge accurately. However, to get over the manual tracking, investing in an ideal invoicing software having automated time tracking tools is a wise decision.

4. Chase behind late payment:

   While it’s good to get humble and polite with your clients for maintaining long term healthy relationship, it’s equally important to take action when necessary. Timely following up on overdue invoices is essential to maintain financial stability and ensure that you get compensated fairly for the services provided.

5. Clearly convey your payment terms:

   There is no space for guesswork. Don’t leave it up to your client on what and how much you should get paid. To avoid any potential disputes with clients and for smooth payment processing, it is essential to clearly convey the payment terms.

6. Acceptance of all payment methods:

   To ensure a streamlined payment process, catering to the client’s client’s preferred method is important. You need to allow them to pay in whichever form they want to. It can be through credit cards, bank transfers, digital wallets, etc. Offering such flexibilities will result in expedited payment and convenient settlement of invoices.

What are the Ways to Generate an Accurate Contracting Invoice?

Here are the two important ways with which you can generate accurate hassle-free contracting invoice covering all the crucial invoice details specified above:

1. Free contractor invoice templates:

   There are multiple customizable free contracting invoice templates offered by InvoiceOwl. You can simply go through their range of invoicing templates, readily available in different file formats. What you have to do is:

   • Select the template format that best suits you.
   • Next, just fill the details in the required fields. It can include business and client details, services provided, amount charged and many other details.
   • You can even modify the template colour to match with your brand.
   • Once all the personalization is done, save the template by labeling it as invoice.
   • After saving, send it to your client via email or you can even take the print of it.
2. Efficient invoicing software:

   To permanently streamline your billing process, integrating an advanced invoicing software like InvoiceOwl is essential. Gone are the days of spending crucial working hours for generating professional invoices and chasing payments. Now with advancements in automation, manual tasks can be easily done with the software.

   Have a look at the ways in which InvoiceOwl prove advantageous to streamline the billing processes:

   • Send professional estimates from the multiple estimate templates available
   • Quickly accept upfront deposit once an estimate is on its way to becoming a lead
   • Create an unlimited error-free invoices in the blink of an eye
   • Get the real-time notification of the invoices
   • Track the payment status of the invoices, whether paid or unpaid, and send automated reminders
   • Enhance the reliability of your documents by instantly e-signing them
   • Maintain all your client details at one place, so that you do not have to enter them repeatedly
   • Manage multiple companies (up to 5) under one InvoiceOwl account
   • Sync your InvoiceOwl account with QuickBooks Online for easy bookkeeping
Frequently Asked Questions

1. What is an Invoice?

   An invoice is an formal document issued by the vendor to its clients, typically used in business to request payment for products or services provided. It is an evidence of the services rendered against which a fair payment should be made to the seller.

   It typically includes essential company details like: business name, business logo, contact information, email address, description of the services rendered, amount charged and payment terms.

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2. Why is getting right invoicing as a contractor important?

   Independent contractors should ensure correct invoicing of their contract work because of the following reasons:

   • To enhance professional reputation and credibility among the clients
   • To ensure prompt payment and healthy cash flow
   • For keeping transparency among the client for the amount charged
   • To ensure smooth tax and legal compliance
   • To effectively track incomes and expenses

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3. What is the best invoicing software?

   Here is the list of best online invoicing software available:

   1. InvoiceOwl

   2. Zoho

   3. FreshBooks

   4. Invoice2go

   5. Xero

   6. Wave

   7. Invoicera

   8. Invoice Ninja

   9. Sage

   10. Harvest

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4. What is the difference between an invoice and a receipt?

   An invoice and a receipt both are the financial documents serving different purposes and are issued at different time interval.

   Invoice: Invoices is typically issues by the seller to the buyer before the payment of goods or services are made. The primary purpose of an invoice is to request payment from the buyer for the goods or services delivered.

   Receipt: Receipts are also issued by the seller but not for requesting payment but as an acknowledgement to the payment made. Receipts are the evidence of the payment received by the sellers.

Conclusion

After going through this detailed guide on invoicing effectively as a contractor, you might have got completed understanding. All you now need is an efficient invoicing tool to send invoices and get paid promptly. Integrate InvoiceOwl today as an optimal estimating and invoicing solution. It will help you create personalised invoices, track them, request and accept payment

Not just this you will also be able to align your invoicing and accounting operations by easily syncing your InvoiceOwl account with QuickBooks Online. When everything is getting you under one single account, why resist trying for free. start a FREE trial period today and experience the streamlime invoicing like never before.