An invoice is an essential document that freelancers and agencies need to run their business correctly. Aside from being organized and ensuring clients pay you on time, authorities may insist you prepare and keep records of your invoices for financial reporting.
Invoices are used to itemize and record a transaction between a buyer (client) and a seller (freelance consultant). A typical invoice for hours worked example contains a summary of the services rendered and the amount billed for such services.
Normally, your clients would expect to receive an invoice from you when you complete a project. Many times, however, you will get clients with whom you sign a different kind of contract. The contract may state that you only send an invoice for hours worked. This has its benefits. It also comes with a few risks. It’s important for you to familiarize yourself with this kind of arrangement to get the most benefit from it.
1. What should an invoice for hours worked contain?
There are different invoice templates and formats for freelancers available online that you can choose from. But, some may contain less critical information than others. Thus, to select a proper invoice for hours worked example, you need to know what a good invoice should contain.
Below are some things we have compiled for you from our findings.
- Service provided – The service provided field is significant because it allows you to organize your bills in a way the client can easily understand. It replaces the product field in other types of invoices like eCommerce invoices. Other names for it are project name or task name.
- Measurement unit – The measurement unit field replaces the quantity field in other invoices. It is usually in man-hours.
- Hours worked – This field is used to record the time used to work on a project. It is recorded in hours, but depending on your agreement with your clients.
- Hourly rate – This field records the rate agreed to by your client for your freelance services.
- Net amount – This field is the client’s billed amount before tax. It is derived from the multiplication of the hours worked and the hourly rate.
- VAT – The field is where you record the value-added tax, which depends on your country. Try to find out the rate applicable in your country.
- Total amount – This is the actual amount your client is expected to pay. It is derived from adding the VAT to the Net Amount.
2. Two important tips about invoice templates for hours worked
Before you go ahead to prepare an invoice as a freelancer, you may want to use the tips below. These tips are important, even if you are using an invoice for hours worked example or template.
2.1. Picking an hourly rate
Choosing the hourly rate for your freelance services can be very challenging. While you want to remain competitive in the industry, you want to also charge honestly for your efforts. Apart from your billable hours, you may want to charge for your effort during non-billable hours.
For instance, you may hone extra skills during non-billable hours so that you can provide quality services to your clients. It is good practice to factor that into your hourly rate.
2.2. Using a time tracker
One important task that worries freelance consultants is tracking billable hours. Lots of freelancers have different means they employ to do that. While some of these means are manual, others are automated. While you may achieve the same thing irrespective of the method you use, you must understand that the manual method (writing the hours worked and using MS Excel to record it) is not the best.
You may forget to jot down some billable hours or even make mistakes while entering data into MS Excel or Google Sheets. So, our advice for you is that you make use of a time-tracking software that will automatically track your time. Note that software like this can even calculate your clients’ bill provided you supply the rate. Thus, it becomes easy to prepare an invoice using an invoice for hours worked example.
3. Track time before creating an invoice for hours worked
The first thing you have to do is to find a reliable tool for tracking time spent on each project. That’s your best bet for converting the hourly rates into the invoice that you need to send to the client. Find such tools on the Internet. In the event that you can’t find the tools, you can always record everything down on a piece of paper manually. Alternatively, you can always rely on an Excel spreadsheet to help you keep accurate records.
4. Calculate billable hours when preparing an invoice template for hours worked
It’s also important to know how to calculate billable hours. This requires that you understand the value of your time. Otherwise, you may end up leaving some hours unbilled, which would then impact your earnings negatively. A billable hour refers to the time you set aside, dedicate and spend on the project, which you then intend to bill clients for. Obviously, the rate can never be outside of the one that appears on the agreement you signed with the client.
5. Separate hours spent on projects from everything else when preparing the invoice for hours worked
It can be difficult for you to prepare the invoice for hours worked, especially if it’s your first time. However, you can take a few measures to make the task much easier and simpler for you. First, you must track the hours spent on the client’s project. Separate these from the time you spend on other tasks. For example, don’t bill the clients whenever you call them to ask for a clarification. Bill only for the time you spend on the actual work.
6. Choose how to charge clients using the invoice template for hours worked
It would also be crucial for you to determine how you intend to charge the client. Again, the contract the two of you signed should be clear on this issue to avoid misunderstandings, confusion, and frustrations with one another. Your options include charging per hour. The other option is to charge per project. Some projects are best charged on an hourly basis. Charge other projects only once you complete them to the client’s satisfaction.
- Service providers prefer charging hourly rates.
- Hourly rates are best for profitability. They also enhance transparency.
- Charging per project shows the clients that you know what you bring to the table.
- The rates are not set in stone. Change them based on the clients you get, as the business grows.
7. Consider non-billable work when preparing your invoice for hours worked
Now that you’re preparing an invoice for hours worked, it would also be prudent to know what to do with the non-billable hours. Before you decide what to do, it would be good to understand that your company needs to continue providing similar or better services to clients today and in the future. For that to happen, you would have to make money. Therefore, you may need to include a small fraction of the non-billed work in the invoice.
8. Study different invoice templates for hours worked
Find as many templates of the invoice for hours worked as you can get. Study them. Familiarize yourself with the contents of this type of invoice. Search the Internet to see if you can find free templates in case you’re unable to afford the premium ones. Do you remember the point regarding time tracking? Make your work easier by automating this process to avoid making mistakes associated with recording the hours manually.
Learn to prepare an invoice for hours worked, as they can sustain and grow your business.
9. How to create an invoice template for hours worked
Freelancers are individual contractors that work on an hourly basis need to send clients an invoice for hours worked to get paid. If you are an expert that charges hourly, every minute of your time is valuable and should be rewarded. The hourly rate invoice details useful hours spent on a particular task in exchange for monetary compensation. You must have agreed with a client on a fair hourly rate for your service before sending your invoice for hours worked.
You should consider tracking hours worked with a reliable tool to convert time spent on a project into rates. A freelance time tracking and billing software would help you organize your projects to the last detail while you bill your clients easily.
10. Requirements of an invoice for hours worked
Every time spent on a task by freelancers that work by the hour should count. So, it is essential to learn how to format and quickly send invoices to clients. Downloading an invoice for hours worked template is another option to save you time to concentrate on your core business activities. However, you should be familiar with a proper invoice template to help you select one. See the relevant sections of a template you should use.
This is where you input your business name and contact address. Include the date you created the bill and a unique invoice number.
10.2. Customer details
The bill should have a field for customer contact address, email address, phone number, and website.
10.3. Service details
This field is where you describe the details of the service offering in your invoice for hours worked as opposed to product details for eCommerce invoices.
10.4. Hours worked
Billable hours are recorded in this field.
10.5. Hourly rate & net amount
Here is where you include the rate per hour and sum the fees before tax.
You record value-added tax rate in this field, and the amount is country-specific.
11. Tips for creating an invoice for hours worked
One of the many challenges freelancers face is how much to charge for an hour's work. From the start of a project, you need to decide a fair amount to charge for your effort while you remain competitive to attract more clients.
11.1. Use a time tracker before preparing the invoice for hours worked
The first that comes to mind before working on a project should be how to track hours worked effectively. While MS Excel and other manual methods could help, using a smart application would eliminate the chances for mistakes, especially when you work for long hours. There are online time trackers and billing software to help organize your work and convert your effort to an hourly rate into an invoice for hours worked. Some of these apps usually have in-built templates to automate hours and tax calculations, leaving you more time to concentrate on your job.
11.2. Calculate billable hours when drafting the invoice for hours worked
It is also vital you understand how to charge your client when it comes to billable hours. A billable hour is the time you spent on a project for which you charge a client. A billable hour and rate charged is based on a contractual agreement between you and your client. Professionals like lawyers and accountants often sign contracts that define billing methods with clients at the start of a project. In such cases, a billable hour may not be an actual hour per se, but the sum of tracked hours rounded to the nearest agreed time increment.
11.3. Consider non-billable hours for your invoice for hours worked
Some freelancers use non-billable hours to invest and learn new skills so they can offer top-notch services to clients. Your rate and consequently invoice for hours worked should reflect those hours to sustain your business. However, that is a business decision for you to make, which depends on your goal and pricing strategy.