How to Invoice as a Contractor: Simple Guide to Invoicing with Mistakes to Avoid
Invoicing is an important skill for independent contractors to master, since you’re constantly juggling different projects that may have different billing terms and timelines. To send accurate invoices, contractors should carefully track their time and create detailed invoices as soon as they complete a project for a client. Proper invoicing is a key part of financial accounting for small businesses.
Learn how to invoices as a contractor and discover common invoicing mistakes to avoid:
How to Invoice as a Contractor
Contractors should create detailed invoices that outline important billing information, including deadlines for payment, an itemized list of the services provided and the total balance owing. Here’s a guide on how to invoice as a contractor:
1. Identify the Document as an Invoice
This might seem obvious, but it’s important that you clearly label the document as an invoice in the header, so it’s immediately clear to your clients what they’re looking at. Include the word “Invoice” in a large, bold font.
2. Include Your Business Information
Also in your header, you’ll need to list your business’s contact information. If you have a logo, include it here. Add your name, address, email address and phone number.
3. Add the Client’s Contact Details
Below the header, add your client’s contact information. Make sure you ask each of your clients who the correct billing contact is for your invoices. Often in the case of larger companies, there will be a dedicated billing department and your point of contact for invoicing will be different than your daily business contact.
4. Assign a Unique Invoice Number
Every invoice you send should have a unique invoice number assigned to it. This will help with record keeping, both for you and for your clients. It also makes it easier to refer to a specific invoice if an issue ever arises with payment. The easiest system of assigning numbers involves numbering your invoices sequentially, starting with Invoice #001, then Invoice #002 and continuing in order from there.
5. Add the Invoice Date
Include the date that you’re sending the invoice in the top section of the document.
6. Provide Details of Your Services
Next, create a table with four columns. This will hold an itemized list of your services. The first column should include a brief description of the services you provided, the next column should include the quantity or number of hours worked, the third column will list your rate of pay and the final column should include the subtotal for each service.
7. Include Your Payment Terms
Add your payment terms to your invoice, including the payment methods you accept. You should also outline the details of your late fee policy, if you have one.
8. List the Total Amount Due
In the bottom section of your invoice, list the total amount owing for the bill, including applicable tax. Make sure this section stands out on the document, either by using a large font, bold lettering or a different font color.
9. State the Payment Deadline
Write the deadline for payment in a bold, easy-to-read font. Be as specific as you can be with the payment due date. Write out the full date, as in: “Payment Due November 30, 2018” rather than more vague payment terms, such as “Payment Due in 30 Days,” which can lead to confusion and delayed payments.
Contractor Invoicing Mistakes to Avoid
Contractors can get paid faster for their services by avoiding these common invoicing pitfalls:
1. Forgetting to Track Your Hours
It’s important to establish a system for tracking your hours as soon as you begin working as a contractor, since you’ll likely charge most of your clients by the hour. You can track your hours manually, by writing down the start and end time each time you work on a specific project, along with a brief description of the work completed. Or, if you use a cloud-based accounting solution, you can easily track your time directly in the software, to streamline your time tracking system.
2. Failing to Send Invoices Immediately
The quicker you send out your invoices to clients, the quicker you should receive payment. As soon as you complete a contract with a client, create an invoice and send it along with the final work. The project will then be top of mind for the client, which can help remind them to process the payment right away. Sending the invoice immediately also means the project is fresh in your mind, so you’ll be less likely to overlook an aspect of the work and forget to bill for it.
3. Not Formatting Invoices Consistently
As a contractor, you’re constantly working on different projects with differing tasks and services. That can lead you to fill out invoices differently from job to job, which wastes your time and also looks less professional in the eyes of your clients. Develop an invoicing template that works for your needs and always use it as the starting point when creating new invoices. It will save you time and deliver consistent branding each time you invoice clients.
4. Neglecting to Add Payment Terms
Make sure every invoice you send outlines your payment terms. If a client isn’t aware of your payment terms and tries to pay their bill with a payment method you don’t accept, it can lead to frustration for your client and a delayed payment on your end. It’s also a smart practice to discuss your payment terms with a new client before signing a contract, so they understand your policies up front.
5. Not Following Up on Late Payment
Sometimes contractors fail to follow up with a client when a bill is past due, to avoid an awkward conversation or to keep from seeming rude. To ensure you get paid for your work, you should follow up as soon as a payment is past due. Just send a polite, brief note reminding the client that the payment is overdue and let them know how they can pay the bill. Be diligent but pleasant in following up until you get paid.
Contractor Invoice Template
If you want to save time and use an existing invoice design rather than creating one from scratch, there are many invoicing templates you can download online. FreshBooks offers a free contractor invoice template that’s tailored to the specific need of contract workers, so you can edit the document to suit your needs and start invoicing clients right away. The template is available to download in Word, Excel and PDF format.