How to Invoice as a Contractor

How To

Contractors like you have a wealth of expertise that solves real-world problems for clients. But that knowledge doesn’t always extend to the admin side of business.

If you’re wondering how to invoice as a contractor, this guide has you covered.

You’ll learn why proper invoices are essential for your business. We’ll list key information to include and the types of invoices you can use.

We’ll explore strategies for setting payment terms. We’ll also discuss invoicing tools and software that’ll make your life easier.

Finally, we’ll share actionable tips to ensure you get paid on time every time.

Understanding the Importance of a Proper Invoice

An invoice is like a bill. It’s sent by a provider—like your business—to a customer. It requests payment for a product or service.

An invoice has a few different purposes. It ensures you get paid, but it also acts as a dated record. It details what you delivered and how much it cost.

It also explains to the customer how to make a payment and when that payment is due.

As you can see, accurate invoices play a really important role in the billing process. They make sure you get paid on time and receive the right amount.

They also provide clarity for your customers and make billing more transparent. The customer knows exactly what they’re paying for.

Confusing or inaccurate invoices can lead to all sorts of trouble:

Late payments
Incorrect payment amounts
Payment disputes

These outcomes can turn a positive customer experience into a negative one. Worse-case scenario, your customer might take their business elsewhere.

Key Information to Include in a Contractor Invoice

You know the why. Now, let’s dig into the how.

The best invoice structure for contractors may differ slightly depending on the nature of your business. But, in most cases, you will include the following information:

A unique invoice number that improves organization.
The date the invoice was issued.
Your business name and contact information.
The client’s information, like their name and contact details.
A description of the products and services provided. This might include the number of products or services. It might also include how many hours you worked.
The cost of each product and service. If you provided multiple products—like a number of tiles to redo a bathroom—you might include both the unit cost and total cost. This also applies to jobs charged by the hour. List your hourly rate and the total cost of all hours worked.
The total amount due, which is the sum of all products and services.
Your payment terms, which include when payment is due, what happens if a payment is late, and how to pay.
Any additional notes, like extra fees or unique terms.

FROM ONE OF OUR PARTNERS: Creating an Effective Invoice Number System: Best Practices

Different Types of Contractor Invoices and When to Use Them

No two jobs are alike. Contractors know that better than just about anyone. That’s why it’s a good idea to be familiar with different invoice types. 

Let’s take a look at some of the most common and when to use them.

Standard Invoice

This is your stock-standard invoice type. It’s simple and will work in a huge variety of circumstances.

It details the total amount owed for the goods and services you provided.

When should you use it?

It’s best for one-off jobs and completed projects. For example, if you’re a plumber who unclogged a blocked drain, you could use a standard invoice.

Progress-Billing Invoice

Are you a contractor who regularly works on big projects? A progress-billing invoice might be the best fit.

This invoice is issued at predetermined project milestones. For example, one project might include three progress-billing invoices.

This approach offers a couple of benefits:

You get funds throughout the duration of the project. This helps you stay on top of your cash flow. You can pay your staff and purchase materials.
Your clients can break big expenses into smaller, more manageable payments. This reduces financial pressure on their end. It can also make payment logistics simpler—some payment methods have a cap on how much can be transferred in one go.

When should you use it?

It’s ideal for long-term or large-scale projects like construction. After completing the foundation of a building, a contractor might send a progress invoice.

Time and Materials Invoice

This invoice breaks down charges into categories. This includes the number of hours worked (time) and the products used (materials).

When should you use it?

It’s a good choice for projects where the scope or timeline is likely to change. One example is a repair job—you don’t know what it’ll involve until you get into it.

Recurring Invoice

A recurring invoice is sent automatically at regular intervals. There’s no extra work required.

When should you use it?

These invoices are excellent for ongoing services, subscriptions, and memberships. If you work on a retainer, for example, a recurring invoice can reduce the time you spend on billing.

Maintenance services are another good use case. A contractor who performs monthly HVAC inspections can use recurring invoices.

Final Invoice

A final invoice is a bill sent when a project concludes. It includes all charges from previous invoices and records all payments made. It then gives the final balance due.

When should you use it?

It’s good to send a final invoice at the end of a big project or service. It gives both you and your client a comprehensive record of all payments requested (through a progress invoice, for example) and made.

FROM ONE OF OUR PARTNERS: A Step-By-Step Guide to Efficient Invoice Processing

How to Set Payment Terms and Due Dates

Setting payment terms for contractors can feel a little daunting.

What should you include? How much time should you give your clients? How can you balance the customer experience with your own cash flow needs?

Those questions are important, but before you iron out the details, remember this: your customers value honesty.

Upfront, clearly communicated payment terms help you win trust. And this matters—a lot.

Customers who rate brands as trustworthy are three times more likely to stay loyal when a mistake occurs. What’s more, 88% are likely to purchase from the business again. Sixty-two percent will shop almost exclusively from that brand.

The takeaway?

Add payment terms to every invoice you send.
Use easy-to-understand language.
Put key information first, like the total amount owed and the due date.
Be open about payment policies like late fees.

These contractor billing tips will set you up for success. From there, give these strategies a go:

Define the Due Date

When setting due dates, you have options:

A specific calendar date: For example, “Payment due on January 31, 2025.”
X days from the issue date: Such as, “Payment due within 14 days of receipt.”

Be reasonable when deciding on a timeframe. Your clients need enough time to review and process the invoice, but don’t forget your cash flow needs.

Request a Deposit

Deposits are an upfront payment for a portion of the total project cost. They can be a flat fee or a percentage of the final amount.

The benefits?

You get paid right away, giving you funds to buy materials or cover setup expenses.
The final payment is smaller. This can make it easier for customers.

Clearly outline deposit requirements in your payment terms. Note how it will be applied to the final balance.

Charge Late Fees

Struggling with late payments? Late fees can encourage timely payment and compensate you for delays.

Here are three ways to calculate fair late fees:

Flat fee: Charge a fixed amount for overdue invoices.
Percentage-based fee: Add a small percentage of the overdue amount each week or month.
Daily fee: Apply a small daily charge until the invoice is paid.

Offer Payment Plans

Payment plans can make it easier for customers to manage larger invoices. Instead of one lump sum, they pay smaller amounts.

Why might this appeal to customers?

It spreads out their financial burden.
It makes your services more accessible to budget-conscious clients.

Here are some best practices:

Set clear terms that outline the number of payments, amounts, and due dates.
Automate where possible with a recurring billing system.
Include a small fee (if needed) to cover administrative costs.

Invoicing Tools and Software to Streamline Your Process

You can create and send your invoices manually. But truth be told, it’s the most time-consuming and error-prone contractor invoicing process.

One alternative is to use a template. An invoice template is a document that contains the essential invoice elements for contractors. All you have to do is fill in the blanks.

This makes invoicing faster and more efficient. Your invoices look more professional, too, because they are consistent.

Another option is to use invoicing software. This can be an absolute game-changer—expect fewer mistakes and a gold-standard payment experience.

This experience can encourage repeat business, too. More than nine in 10 consumers say that customer service affects loyalty.

Invoicing software allows you to generate sleek, easy-to-read invoices in just a few clicks.

Plus, if the tool is purpose-built for contractors like Joist, it’ll do all your calculations for you. No more tapping figures into your phone over and over again, only to get different results!

To choose the right software for your business, consider the following:

Does it cater to the specific needs of contractors? Look for features like progress billing and time tracking.
What contractor payment methods does it support? It should allow multiple options like credit cards and ACH transfers.
Does it fit your budget? Some tools charge monthly fees, while others have pay-as-you-go pricing.
Is it easy for you and your customers to use? The best software should allow you to create invoices in minutes. It should then send them straight to your client’s inbox with payment links.

Tips for Getting Paid on Time as a Contractor

Now you know how to invoice as a contractor. Try these tips to get paid on time:

Check that your payment terms are crystal clear. Confusion can cause delays.
Offer more payment methods to cater to different preferences.
Invest in invoicing software for hassle-free payments.
Charge a late fee to inspire fast payment.