The art of invoicing is not a nice-to-have in running a business—it’s a must-have. As a contractor, you not only have to master the art of your trade—be it an electrician, mechanic, or crane operator—but you also have to master contractor invoicing. At the end of the day, knowing your tools and machines will only get you so far if you do decide to take the plunge and start your own trade business.
Contractor invoicing is a business-critical skill that every contractor needs to know. Juggling projects, tasks, and clients is one thing, but understanding billing terms, timelines, and the financial side is just as important, if not more.
In this guide, we’ll be covering:
- Why invoicing is important for contractors
- How to approach contractor invoicing (steps)
- Contractor invoicing mistakes to avoid
Why invoicing is important for contractors
Invoicing is the lifeline of your business, at least from the accounting perspective. Invoicing helps you get paid for the work that you do.
A few reasons why we can’t overstate its importance are due to these factors:
Use it to Stand Out. Invoices are an extension of your company brand, so use them to your advantage to stand out to your clients. Invoices are documents after all—use it strategically to convey your brand. You can use your branding colors, trade company logo, and include a direct note to your client regarding the project. In fact, be as personal as you can be.
Don’t Forget Key Items. When it comes to contractor invoicing, you don’t want to miss out on charging for materials. Contractors working in trades are generally expected to purchase supplies or parts to complete the work for a client. This cost is typically passed along to your client in the invoice with a mark-up: a percentage added to the material price to take home as profit.
Not sure what to mark-up? Percentages can vary depending on the material sourcing and the market you operate in. If you’re a plumbing contractor purchasing tubing cutters and hacksaws from a wholesaler, your markup will be higher than if you buy them from a retailer.
How to approach contractor invoicing (steps)
Step 1: Choose the right invoice
Contractor invoicing isn’t a one-size-fits-all process. When choosing the right invoice for your trade business, be sure to consider:
- What industry your business operates in
- Which format you prefer
- Which format works best for your device
- Which payment plan and schedule you want to use for your client
Choosing the right invoice can vary depending on the industry. A digital designer’s invoice might look different than your contractor invoice, even if the core items of the invoice look the same.
If you’re running a trades and construction business, you should consider these factors when choosing the right invoice type.
Some common invoices that you may see are:
The Standard Invoice
A standard invoice is issued by the business and submitted to the client and is the most common form of invoice available for small businesses. The word ‘standard’ is there for a reason. This invoice type is the most flexible document and can be used to fit the majority of the industries and billing cycles. Most standard invoices include:
- Your business name and contact information
- Your client’s name and contact information
- An invoice number
- The amount of money the client owes your business for services provided
Recurring invoices are helpful for small businesses that charge the same amount periodically for their services. Although not as common for contractors who provide trades and construction services, it is still a possibility when recurring billing is involved.
The Timesheet Invoice
If your business charges each project based on an hourly rate, then a timesheet invoice is the way to go. A timesheet invoice is common for contractors, so it’s important to establish a system for tracking your hours as soon as you begin work.
Pro tip: Track your hours and include the time log as an attachment to your invoice. Trust us, your clients will appreciate it if they do want to dive a little deeper!
The Commercial Invoice
The commercial invoice is often used by a business that sells goods to customers globally. Focusing on selling particular goods, commercial invoices typically includes details needed to determine customs duty for cross-border sales.
You’ll find these details on a commercial invoice:
- Description of goods
- Shipment quantity
- Weight and volume
- Total value
- Packaging format
The Final Invoice
As your carpentry or building contract closes, you’ll want to request payment as soon as possible. Send a final invoice outlining the work that you completed, alongside any interim invoices that have already been sent.
This invoice is normally more in-depth than an interim invoice or pro forma invoice and includes:
- An itemized list of all services provided
- Total project cost
- Invoice number (for tracking purposes)
- Invoice due date
- Payment methods accepted (i.e. e-Transfer, PayPal, bank cheque, or other)
Good invoicing etiquette is to send a final invoice to wrap up your business between you and a client. If you want, use the notes section or the email to send your thank you, and appreciation of your working relationship. You never know what other opportunities they may have in the future!
Step 2: Pick your contractor invoice format
By format, we mean whether you want to invoice using Google Docs, Google Sheets, Word, Excel or PDF. The options depend on what tools you prefer to use. Microsoft products often require a license, whereas Google Suite offers its products, like Google Doc and Google Sheets, free of charge.
Pro tip: While your preference matters, you may want to ask your clients which invoice they prefer. Some clients may prefer Word invoices in order to match their internal systems so that they can make comments or adjust, as needed. Other clients are happy to receive them as a clean PDF file. Whichever format they (or you) prefer, be sure to check with them at the beginning of your working relationship, then stick with the same format for any recurring invoices.
To help you get started, TrulySmall™ Invoicing offers free invoice templates for contractors with all the fields you need built in. They’re available in all formats, ready to go when you need them!
Step 3: Know what to put on your invoice
Contractor invoicing is just like invoices used for other industries. The outline is the same, every time. Other than charging for materials, you’ll want to include these details on your invoice:
1. Business name and info
Your business name is a foundational element of a professional invoice. It identifies your business and establishes your brand.
2. Invoice #
A unique invoice numbering system helps you stay organized, especially come tax season.
3. Date of invoice
Date of when the invoice was generated and not when the goods were supplied.
4. Contract/service description
Any terms or other contractual descriptions you would like to include.
The sum total of all goods listed on the invoice before including any discounts or other costs.
6. Bill to (client information)
Your client’s information including their full billing address.
A clear description of the goods and services being invoiced for, with each service or item on a separate line.
Any taxes (if applicable) that you may charge on your invoice.
9. Total, including sales tax
The total amount of your invoice after any sales tax, discounts, etc.
Roundup: Ready, set, invoice!
Invoicing doesn’t have to be a difficult or tedious process. In fact, it can be a positive experience for both you (the supplier) and your client (the buyer). Try out these tips yourself, especially now that you know the importance of invoicing, the nuisances you need to stay on top of when it comes to contractor invoicing, and what to include on your invoices.
Looking for a simpler invoicing solution? Start sending invoices totally free with TrulySmall™ Invoices. Use it on your computer or download TrulySmall’s invoicing app today—it’s free and available on iOS and Android.