How to Invoice as a Contractor
Understanding the Invoicing Process as a Contractor
Hey there! Let’s make your workday a little easier. If you’re a contractor working through a limited company or umbrella, invoicing is a vital part of running your business. Getting it right keeps your cash flow healthy and helps maintain strong relationships with agencies and clients alike.
When you sign a contract, it will outline how much you are paid and how invoices should be submitted. Increasingly, agencies offer self-billing—meaning they generate invoices on your behalf once your timesheets are approved. If this isn’t available, you’ll need to issue invoices yourself, ensuring all details are accurate and up to date.
What You’ll Need Before You Start
Gather these details before preparing your invoice:
Your company’s legal name and registration number
VAT registration number (if applicable)
Registered business address
Contact details (email, phone)
Client or agency’s name and address
Client contact name (if possible)
Purchase Order or reference number (if required)
Description of services and relevant dates
Your agreed hourly or daily rate
Your bank account details for payment
Payment terms as per your contract
Having everything to hand streamlines the process and reduces mistakes.
Step-by-Step: Creating a Professional Invoice
Let’s walk through the essentials of a solid contractor invoice.
1. Clearly Title the Document
Start with the word INVOICE at the top. This avoids any ambiguity.
2. Add Key Dates and Numbers
Invoice date
Unique, sequential invoice number (especially if VAT registered)
3. Include Your Company Details
| Requirement | Example |
|---|---|
| Company name | ABC Consulting Ltd |
| Business name (if different) | ABC IT Solutions |
| Company reg. number | 12345678 |
| VAT number | GB123456789 |
| Registered address | 1 Main Street, London, W1 1AA |
| Contact info | info@abcconsulting.co.uk, 01234 567890 |
4. Add Client or Agency Details
Name and address
Contact person (if known)
Purchase Order/client reference
5. Describe the Work
Concise description of services
Date(s) of supply
Breakdown of units (e.g., 37.5 hours @ £40/hour)
Your rate
6. Summarise the Financials
Subtotal (net amount)
VAT amount (if applicable)
Gross total
7. Provide Bank Details
Include your sort code, account number, and account name for electronic settlement. Accuracy here ensures timely payment.
8. State Payment Terms
For example, “Payment due within 14 days.” Even if your client sets the terms, restating them on your invoice is good practice.
9. Mention Your Statutory Rights
Remind clients you have the right to charge interest on late payments under the Late Payment of Commercial Debts (Interest) Act 1998. This encourages prompt settlement.
10. Double-Check Everything
Mistakes can cause delays. Review all details before sending. If you’re sending by email, confirm you have the correct accounts department contact.
Troubleshooting and Best Practices
Contracting can be demanding, but your invoicing routine needn’t be. Here are some common challenges and how to address them:
Self-Billing Arrangements
If your agency uses self-billing, they’ll generate invoices for you automatically. Ensure your details are correct and update them if anything changes.
Invoicing via an Umbrella Company
Most umbrellas invoice on your behalf. If you’re not on a self-billing arrangement, check with your umbrella for their process.
Presentation Matters
While not a legal requirement, professional-looking invoices (with your logo, clear formatting, and branding) foster trust and clarity.
Use Accounting Software
Many contractors use cloud tools like FreeAgent, Xero, QuickBooks, or FreshBooks. These speed up invoicing and help manage records. Prefer a quick fix? Try free tools such as Zoho or Invoice Generator if you need something simple.
Working with Public Sector Clients
Be aware that many government bodies require electronic invoicing. Modern accounting software typically offers this functionality.
Record-Keeping
By law, you must keep all invoices and accounting records for at least six years. HMRC expects sequential, gap-free invoice numbering.
Download a Free Invoice Template
Not ready for online software? Download a straightforward MS Word invoice template (VAT registered) used by many contractors:
What to Do if Payment Is Late
Sometimes, payments don’t arrive when expected. Here’s what you can do:
Politely chase up the accounts department after the due date.
If payment remains outstanding, you are legally entitled to charge statutory interest (8% above the Bank of England base rate) and a fixed debt recovery fee, depending on the invoice amount.
Many contractors hesitate to enforce this, but it’s worth including a reminder on your invoice.
Useful Links:
Final Thoughts and Next Steps
Invoicing isn’t just a formality—it’s your right as a professional and the engine of your business’s cash flow. Get your process tight from the start:
Always confirm who approves your timesheets and who handles accounts at your agency or client.
Keep templates and records organised, whether digitally or on paper.
Use the right tools to save time and reduce errors.
Stay proactive about chasing payments and know your statutory rights.
With the right approach, invoicing doesn’t have to be a chore. Here’s to prompt payments and smooth contracting!
