What a contractor invoice is
A contractor invoice is a formal request for payment that you, an independent contractor, send to a client for services you have delivered. Because you are not an employee, no one withholds tax for you and no one runs payroll on your behalf - the invoice is the record that triggers payment, supports your own bookkeeping, and proves to a tax authority what you billed and when. It is the single most important document in a freelance or sole-trader cash flow, so getting the fields right matters.
The same template works whether you charge by the hour, by the day, or as a fixed project fee. What changes is the line-item detail: hourly work shows quantity multiplied by rate, while fixed-fee work shows one line for the agreed amount. Either way the invoice should leave no ambiguity about what was done, how much is owed, and by when.
What to include on a contractor invoice
A contractor invoice does not need to be complicated, but it does need to be complete. Leaving off a unique number, a due date, or the basis of the charge is the most common reason invoices get queried or paid late. The fields below cover what most clients and accounting teams expect to see:
- Invoice title and number
- The word "Invoice" plus a unique, sequential number so both sides can reference and track the document.
- Your details
- Your trading name, address, contact email, and any business or tax registration number that applies to you.
- Client details
- The client's legal name, billing address, and a named contact or accounts-payable email where the invoice should be sent.
- Invoice and due dates
- The date you issue the invoice and the date payment is due, derived from your agreed payment terms.
- Purchase order (PO) number
- If the client issued a PO, quote it - many companies will not pay an invoice that is missing the matching PO reference.
- Description of work
- A clear line item for each task, project phase, or deliverable, with the period it covers if relevant.
- Hours and rate, or fixed fee
- For hourly work, show the quantity of hours and your rate per hour; for fixed-fee work, show the agreed lump sum on its own line.
- Subtotal
- The total of all line items before any tax is added.
- Tax
- Any sales tax, VAT, or GST you are required to charge, shown as a separate line with the rate applied, plus your tax number where required.
- Total amount due
- The final amount the client must pay, in the agreed currency.
- Payment terms and method
- When payment is due (for example, net 14 or net 30), your bank or payment details, and any late-payment terms.
Hourly rate vs fixed fee
How you price the work decides how the line items look. With an hourly or day rate, each line shows a quantity (hours or days) multiplied by your rate, so the client can see exactly how the total was built. This suits open-ended or ongoing work and usually pairs with a timesheet you can attach or reference. With a fixed fee, you bill an agreed amount for a defined deliverable regardless of the hours spent - the invoice carries a single line for the project or milestone. Fixed fees give the client cost certainty and suit well-scoped projects.
Whichever model you use, agree it in writing before you start. If a purchase order was raised, the rate or fee on your invoice should match the PO, because most accounts-payable systems block any invoice that does not reconcile to the order.
How it differs from an employee payslip
A contractor invoice and an employee payslip look similar but do opposite jobs. A payslip is issued by an employer to an employee; it shows gross pay, then subtracts income tax, social contributions, and other deductions the employer has already withheld and paid on the employee's behalf. The employee receives the net figure and has nothing further to remit.
A contractor invoice is issued by you to the client. Nothing is withheld: the client pays the full amount, and you are responsible for setting aside and paying your own income tax and any social contributions, and for charging and remitting sales tax or VAT if you are registered. That is why contractors should reserve a portion of every payment for tax rather than treating the whole sum as take-home. In short, a payslip records pay after deductions; an invoice requests payment before any tax obligations are settled by the recipient.
Setting terms that get you paid
The fastest-paying invoices are clear and easy to action. State the due date explicitly rather than just "on receipt", keep common terms like net 14 or net 30, and put your payment details on the invoice itself so no one has to ask. Number every invoice in sequence, send it promptly after the work is accepted, and reference the client's PO if they use one. If you operate in a jurisdiction that allows it, you can also note that statutory late-payment interest may apply, which gently encourages on-time payment without straining the relationship.
Contractor invoice questions
What should a contractor invoice include?
At minimum: the word "Invoice" with a unique number, your details and the client's details, the issue and due dates, a description of the work, the hours and rate or the fixed fee, any tax, the total amount due, and your payment terms and method. If the client issued a purchase order, quote its number too.
Do I need a PO number on my invoice?
Only if the client raised a purchase order. When they do, quoting the matching PO number is essential, because most accounts-payable systems will reject or hold an invoice that does not reference the order it was authorised against.
How is a contractor invoice different from a payslip?
A payslip is issued by an employer and shows pay after tax and contributions have already been deducted. A contractor invoice is issued by you to a client, nothing is withheld, and you are responsible for paying your own income tax and any sales tax or VAT yourself.
Should I charge by the hour or a fixed fee?
Both are valid. Hourly or day rates suit open-ended or ongoing work and show quantity multiplied by rate. A fixed fee suits a well-defined deliverable and gives the client cost certainty. Agree the basis in writing before you start, and make sure it matches any purchase order.
Do contractors charge tax on invoices?
It depends on your registration and country. If you are registered for VAT, GST, or sales tax, you generally add it as a separate line at the applicable rate and show your tax number. If you are below the registration threshold or not required to register, you usually invoice without it. Verify the rules for your jurisdiction.
What payment terms should I use?
Net 14 or net 30 are common defaults, but the right term depends on your client and cash flow needs. State an explicit due date on the invoice, include your payment details, and consider noting that late-payment interest may apply where the law allows it.