An hourly service invoice is an official record of the total hours a company or a freelancer has dedicated to completing one or several tasks. It is issued to customers and clients to collect payment for work performed and inform clients of any important information or events that occurred during the job.
Table of Contents
- Hourly Service Invoice: How to Create an Hourly Service Invoice for Your Business
- How to Calculate Total Hours Worked
- How to Calculate Your Hourly Rate
- Pros & Cons of Charging by the Hour
- What to Include on an Hourly Service Invoice
- What to Do if Your Invoice Doesn’t Get Paid
- Benefits of an Hourly Service Invoice
A service invoice is a document that is used to request payment for services rendered. The invoice should include the date the services were rendered, a description of the services, the amount due, and the date payment is due. The service invoice should be signed by the person who rendered the services. The service invoice should be sent to the person or organization who is responsible for paying for the services.
The simplest method of calculating the total number of hours an employee or contractor has worked on a project is by converting the start and end times into military time (also called 24-hour time). This allows both values to be subtracted from each other. As an example, if work began at 6:30 AM and ended at 3:00 PM, this would be written as 6:30 and 15:00. Subtracting 6:30 from 15:00 leaves us with 8:30, which is the total length of time the worker spent on the job.
An online calculator can simplify the task of figuring out the total time worked. A few recommended calculators are:
- Redcort’s “Free Time Card Calculator“
- The “Time Card Calculator“
- Time Clock Wizard’s “Time Card and Payroll Calculator“
The hourly rate is calculated by taking the amount of money that the person wants to earn in a year and dividing it by the number of hours that the person wants to work in a year.
Offering services on an hourly basis is common in the service industry. Both small businesses and freelancers alike should have an understanding of the basic benefits and drawbacks the pricing type provides. Here are a few:
- Easy to calculate – Only two (2) values are needed to provide customers with the cost of labor: the hours worked and the cost per hour.
- Straightforward for customers – Due to the simple pricing structure, customers understand exactly what they’re paying for. Additionally, if an unexpected event occurs during the job and it needs to go over the expected time, the additional hours can simply be added on. In comparison, if a provider charged on a per-project basis, every additional hour worked would be a decrease in the value of the job.
- Overworking occurs less – Having a strict set of hours that will be worked in a day allows workers to enjoy life outside of the job. Without realizing it, those that work on a set-fee basis will often find themselves working exceedingly more than standard eight (8) hour days to complete their task(s).
- Employers can expect too much – It’s not uncommon for employers to be more demanding of their hourly-based workers. Unlike jobs with a standard fee, the longer the freelancer takes to complete a job, the more the employer feels as though they are paying too much for the services they’re receiving.
- Can deter customers – Although straightforward, hourly-based jobs can cause employers to look elsewhere due to the risk of having to pay extra if a job goes over the expected time.
- Hinders ambition – Similar to being financially limiting as discussed above, working by the hour is harmful to an individual’s motivation. What benefit does working faster provide to a freelancer if they’re paid the same either way? The answer: not a lot.
An hourly service invoice should include the following key features:
- The name and contact information (e.g. billing address, phone number) of the service provider
- The business name and contact details for the client hiring the service provider
- Company logo (if applicable)
- Invoice number
- A clear description of the services rendered
- The date on which the services were provided
- The hourly rate charged for the services
- The total amount due for the services
- Applicable taxes
- The payment terms (e.g. due upon receipt, net 30, etc.)
- Payment methods accepted
The invoice can be generated manually using programs such as Microsoft Word, Microsoft Excel, Google Docs, or Google Sheets, then exported as a PDF and emailed to clients. Alternatively, and to simplify and make the process easier, an online invoice generator can be utilized.
If an invoice is not paid, the account will be delinquent and the account holder will be responsible for the outstanding balance. If the account holder does not make a payment within the grace period, a late fee will be assessed. The account holder may also be responsible for any legal fees associated with the collection of the outstanding balance.
There are many benefits of using an hourly service invoice. Perhaps the most obvious benefit is that it provides a clear record of the time you have worked, and how much you are owed for that work. This can be helpful in ensuring you are paid promptly and correctly for your work. Another benefit of using an hourly service invoice is that it can help you to budget your time more effectively.