Mastering the Art of Hourly Invoicing

The Ultimate Guide for Freelancers to Invoice Billable Hours

Istvan Meszaros  October 12, 2023

Hourly Invoicing

What Is Hourly Invoicing?

For a freelancer, having a clear understanding of hourly invoicing is essential to earning money. It's important to know how to calculate your rate accurately, set up an invoice template, track billable hours, and send and collect payments.

However, wrapping your head around this process isn’t always easy. That's why, in this guide, we'll cover the ins and outs of invoicing for freelancers. We'll go over the definition of hourly invoicing, the benefits of using this form of invoicing, and the best practices that will help you streamline the invoicing process and maximize your earnings.

Hourly invoicing entails charging for services rendered on an hourly basis. This form of invoicing is popular among freelancers and is an ideal choice for those who bill for time spent on projects. By accurately tracking your billable hours and ensuring you are charging the correct rate, you can maximize the value of your work.

Before we get into the details of how to invoice for hours worked, it's important that you understand the benefits of hourly invoicing for freelancers. First, it allows you to be more flexible in your pricing, as you can adjust your rate depending on the complexity of the project and the level of expertise required. Additionally, hourly invoicing allows you to track your time and make sure you are getting paid for the hours you’ve worked.

In this guide, we'll cover everything you need to know about hourly invoicing. We'll begin by discussing how to accurately calculate your hourly rate and setting up an invoice template. We'll then go over the different tools and resources you can use to track billable hours, as well as best practices for sending and collecting payments from clients. Finally, we'll cover automating your invoicing process for maximum efficiency.

Calculating Your Hourly Rate

Accurately calculating and setting an hourly rate ensures that freelancers are compensated fairly for their work. Determining your hourly rate requires considering several factors and accounting for overhead costs.

When calculating your hourly rate, you should:

Start by assessing your expertise and experience.

step 1

Research how much others in your field are charging. This will help you set a competitive rate that reflects the value of your work.

Consider the cost of overhead associated with your projects.

step 3

This includes the cost of materials, software, rent, utilities, and any other costs associated with the project. It is important to factor in these costs when you are calculating your hourly rate, as they can quickly add up.

Take into account the particularities of each project.

step 2

You might need to set a special hourly rate if your project requires significant research or you are dealing with a tight timeline.

Setting Up an Invoice Template

A professional invoice template makes it easier to manage your billing process and helps you get paid faster. Fortunately, creating an hourly invoice template doesn’t have to be complicated.

The first step is determining which software or service you’ll use to create your invoices. If you’re comfortable with spreadsheets, Microsoft Excel is a great option. However, there are also several invoice management services that can help you track your invoices.

No matter which software or service you choose, you should include certain pieces of information on all your invoices. These include your contact information, the date you sent the invoice, the date the payment is due, the name and contact information of the client, the total amount due, and the services and hours for which you’re invoicing. Additionally, you should include any other information specific to your country’s financial system.

You can also customize your invoice template to match your brand. This is an essential but often overlooked step in creating a professional invoice template. For example, you can add a logo and adjust the color scheme to match the branding of your business. This will help your invoice stand out and make a positive impression on your clients.

Tracking Billable Hours

As a freelance worker, you must track and record the time you spend on each project in order to accurately invoice clients.

Time-tracking tools can range from simple stopwatches and spreadsheet templates to more sophisticated apps and software programs. Your chosen tool should be easy to use and help you accurately log your time. For example, some tools allow you to create timers that start and stop when you begin and finish specific tasks. Others enable you to create invoices with detailed breakdowns of your hours and expenses.

To ensure accuracy, it is important to record the time spent on each task as it happens. This eliminates guesswork and potential discrepancies between the hours you logged and the hours you actually worked.

Additionally, it is important to note any non-billable tasks that you undertook when completing a project.

Creating a system for tracking billable hours can help freelancers increase their efficiency and accuracy when it comes to invoicing. Keeping a detailed log of the hours worked is important, as this will help streamline the invoicing process and ensure that clients are billed fairly.

Sending an Invoice

Now that you’ve created your invoice template and tracked your billable hours, it’s time to send the invoice to your client. This is an important step in the invoicing process, as it’s the moment you get paid for all your hard work.

Here are some tips for sending an invoice:

  • Make sure you include all the relevant information. This could include your name, your contact information, the job description, the total amount due, and the payment methods you accept.
  • Include any special notes or additional information your client might need to pay the invoice.
  • In addition to the invoice, include a message to your client. This message should be clear and concise and explain why the invoice has been sent. It should also provide additional information or instructions that your client might need to pay the invoice, such as your preferred payment method.
  • Attach a detailed list of your hours billed on the current invoice for complete transparency. This will help prevent misunderstandings and facilitate quick payment.

Once you’ve sent the invoice, follow up with the client. You can do this simply by sending a friendly reminder email a few days after the invoice was sent to make sure they’ve received it.

If the client has not paid the invoice after a reasonable time, you should take further action. This could include sending more emails, making more phone calls, or even sending a demand letter. Make sure to document all your attempts to contact the client, as you can use this in court should the situation escalate.

Best Practices

Regarding invoicing, freelancers should follow certain best practices to maximize the value of their invoices.

First and foremost, freelancers should strive to be as detailed as possible when creating their invoices. The invoice should include a full breakdown of the services provided, the exact amount of time spent on each service, and a clear and concise description of the services. This will help ensure that clients are aware of the scope of the work performed and the amount they will be expected to pay.

It is also essential for freelancers to be aware of their local tax laws and regulations. Each country, state, and city has its own tax laws that must be adhered to when one is submitting invoices. If taxes are applicable, the invoice should clearly state the amount of taxes due in addition to the total amount payable. Additionally, if discounts or promotions are available, the invoice should list them.

To ensure accuracy, invoices should be reviewed before they are sent. You should check the accuracy of the calculations, the wording of the invoice, and the contact information. This ensures that the invoice is correct and that clients can reach you if they have questions or concerns.

You should also strive to be timely when sending out invoices. Send out invoices as soon as the work is completed or shortly thereafter. This will help ensure that clients are aware of their payment obligations and that you receive payments on time.

By adhering to these best practices, freelancers can ensure that their invoices are professional, accurate, and easy to understand. Furthermore, by following these best practices, freelancers can maximize the value of their invoices and ensure prompt payment.

Automating Your Invoicing Process

For freelancers, creating invoices has traditionally been a time-consuming task. However, with the right technology, you can streamline your workflow and automate the invoicing process.

Automating your invoicing process offers many advantages. It can help save time and money by eliminating manual data entry, reducing human errors and omissions, and ensuring accurate and timely invoicing of your services. Additionally, automated invoicing can provide detailed records of all your invoices and payments, giving you greater visibility into the financial health of your business.

Many options are available for automating your invoicing process. You can use cloud-based invoicing software to streamline your workflow and generate invoices more quickly and easily.

You will find plenty of options if you’re looking for resources to help you automate your invoicing process. You can read online guides and tutorials, watch instructional videos, or hire a professional consultant to help set up your automated invoicing system. Additionally, you can reach out to other freelancers to find out what solutions they use to manage their invoicing.

Sending the Invoice & Collecting Payment

Sending an invoice to a client is only the first step in collecting payment. The success of your invoicing process depends mainly on your ability to send and collect payment efficiently.

Here are some tips and strategies for ensuring your invoices get paid in a timely manner.

  • When sending an invoice to a client, you should be organized and professional. Include all the necessary information, such as the client's name, the hours worked, and the rate charged. Also, indicate when the client is expected to pay so that there's no confusion. If you have a payment system in place, include those details as well.
  • Once you've sent the invoice, focus on collecting payment. You can follow up with the client by either phone or email. Be polite and professional but firm in your requests. If the client has difficulty paying, you can offer a payment plan or another alternative.
  • Feel free to take action if a client fails to pay an invoice. Consider sending a reminder email or making a phone call. You can also impose a late fee or offer a discount to encourage payment. If the client still doesn't pay, you should take legal action.

The success of your invoicing process depends largely on your ability to send and collect payment efficiently. These tips and strategies can help you ensure that clients pay their invoices on time. By staying organized and professional, you can minimize the risk of unpaid invoices and ensure that your freelancing business runs smoothly.

Istvan Meszaros

Founder at PlanArty

Entrepreneur with a BS degree in Computer Science.
Istvan is passionate about time management and effectiveness in business and personal life.