Invoices are formal requests for payment of services rendered or products provided. Contractors rely on invoicing to be paid and maintain financial records, and effective invoicing encourages prompt payment, maintains a healthy cash flow, and improves client relationships by setting clear terms and expectations.

Invoices are also an official document of the work performed and amount due, which is necessary both for tax purposes and financial management. This documentation helps contractors track sales, analyse performance, and plan for future growth. It also creates a clear record in case of a dispute over payments or contracts.

In the 2022 late payments report, just 13% of businesses reported that their average invoice is paid on time, or before the due date. Optimising the invoicing process helps contractors manage their business’s financial health, legal compliance, professional image, and more. This guide will cover how contractors use invoicing software, its key features to look for, and invoicing best practices.

What’s in this article?

• How do contractors use invoicing software?
  
• Key features of effective invoicing software for contractors
  
• Comparing top invoicing software for contractors
  
• Invoicing best practices for contractors
  
• How Stripe Invoicing can help
  

How do contractors use invoicing software?

Here’s how contractors can use invoicing software to optimise their billing and payment processes.

• Invoice creation: Invoicing software comes with pre-designed templates that contractors can customise with their company logo, contact information, and project details.
  
• Tax calculations: The software automatically calculates taxes, reducing the risk of errors.
  
• Expense recording: Invoicing software can be used to log project-related expenses such as materials, travel, and meals. Many platforms also allow you to upload and attach digital receipts for easier expense tracking and reporting.
  
• Invoice delivery: Invoicing software sends invoices electronically via email or through a client portal, ensuring timely delivery.
  
• Payment tracking: The software tracks when invoices are viewed, paid, or overdue.
  
• Payment reminders: Invoicing software can send automated reminders to clients with outstanding invoices.
  
• Payment processing: Some platforms integrate with payment gateways, allowing clients to pay online with credit cards or other electronic methods.
  
• Financial reports: Invoicing software can generate financial reports such as income statements, expense reports, and ageing reports.
  
• Project tracking: Invoicing software can track project profitability by comparing project revenue against expenses.
  
• Team collaboration: If multiple employees are involved in a project, invoicing software can facilitate collaboration by sharing project information and invoice details.
  

Key features of effective invoicing software for contractors

When choosing invoicing software as a contractor, look for these key features:

• Invoice creation and customisation: Creates professional invoices with customisable templates to include your logo, branding, and project details
  
• Expense tracking: Tracks project-related expenses, uploads receipts, and links them to specific invoices or projects
  
• Payment processing: Accepts various online payment methods (e.g. credit card, bank transfers) and tracks payment status
  
• Automated reminders: Sends automatic payment reminders to clients with overdue invoices
  
• Reporting and analytics: Generates detailed financial reports, including income statements, expense reports, and ageing reports for better financial management
  
• Project management: Monitors project progress, milestones, and profitability
  
• Time tracking: Integrates time tracking to accurately bill clients for hourly work and improve project cost estimations
  
• Client portal: Provides a secure online portal for clients to view and manage invoices
  
• Multi-currency support: Handles invoicing in different currencies if you work with international clients
  
• Tax compliance: Ensures compliance with local tax regulations by automatically calculating and applying taxes to invoices
  
• Mobile accessibility: Provides access to invoices on the go with mobile apps for iOS and Android devices
  
• Integrations: Integrates with other business tools such as accounting software, customer relationship management (CRM) systems, or project management platforms
  

Comparing top invoicing software for contractors

Ultimately, the best invoicing software will depend on your specific needs and preferences. Consider these factors:

• Technical skills: How comfortable are you with using APIs and customising software?
  
• Payment processor: Do you already use a payment processor that offers invoicing software such as Square or Stripe?
  
• Feature requirements: What are the basic features you need and which would be helpful to have?
  
• Budget: How much are you willing to spend?
  
• Scalability: Can the software grow with your business as your invoicing needs evolve?
  
• Ease of use: Is the software intuitive and user-friendly?
  
• Customer support: Does the software provider have reliable customer support?
  

Invoicing best practices for contractors

Contractors should keep these best practices in mind to ensure timely payments and maintain good client relationships.

• Consistent formatting: Use a consistent format for all your invoices. This makes it easier for clients to understand and process your invoices.
  
• Prompt billing: Send invoices once work is completed. Late invoicing can lead to payment delays.
  
• Invoice numbering: Label each invoice with a unique invoice number. This helps track invoices and is key for bookkeeping and tax purposes.
  
• Service and cost information: List and describe the services provided, the date the service was performed, and a breakdown of costs. Maintaining transparency can avoid confusion and disputes.
  
• Payment terms: Clearly state your payment terms on the invoice, including the due date, payment methods accepted, and any late payment fees.
  
• Contact information: Include contact information for you and your client on every invoice. This should include names, addresses, phone numbers, and email addresses so your client can easily contact you if there is an issue.
  
• Follow-up: Don’t hesitate to follow up on late payments. A gentle reminder a few days before the payment is due can prevent overdue payments. Follow up again if the due date passes without payment.
  
• Invoice records: Keep copies of all invoices and correspondence about invoices and payments. This documentation can assist with disputes and taxes.
  
• Multiple payment methods: Provide multiple payment options to make it easier for clients to pay. Options such as online payments, credit cards, and bank transfers are popular.
  
• Invoicing software: Consider using invoicing software that can automate the invoicing process, including sending reminders and tracking payments.
  

How Stripe Invoicing can help

Stripe Invoicing provides a comprehensive set of tools to help you create, send, and get paid on invoices more efficiently. With Stripe Invoicing, you can:

• Get paid faster: Allow customers to instantly pay invoices online with Stripe’s conversion-optimised checkout experience.
  
• Automate billing workflows: Easily create, customise, and send one-off or recurring invoices – with no code required. Stripe Invoicing automatically tracks payments, sends reminders, and handles refunds.
  
• Configure for your needs: Stripe Invoicing is configurable to help you meet certain local invoicing requirements.
  
• Integrate with your tools: Stripe Invoicing seamlessly connects with your existing third-party accounting and business management software.
  
• Streamline operations: Reduce manual data entry and administrative overhead by automatically syncing invoice data with your accounting system.
  

Learn more about how Stripe can simplify your invoicing, or get started today.