A contract invoice is a document that outlines the charges for services rendered or goods sold under the terms of a contractual agreement. Service providers and contractors issue these invoices to clients and they are typically used in construction, consulting, or freelance work, where ongoing or project-based agreements are common.

Below, we’ll explain how to draft effective contract invoices, when to issue them, how to handle disputes, and more.

What’s in this article?

• What should you include on a contract invoice?
  
• How are contract invoices different from standard invoices?
  
• When should you issue a contract invoice?
  
• How can businesses make contract invoices clear and effective?
  
• How should you handle contract invoice adjustments or disputes?
  

What should you include on a contract invoice?

To make your contract invoice convey the value you’ve provided, you should include the following:

• Your business name and details (e.g. logo, address, contact info)

• Your client’s information

• Name of the specific contract or project (e.g. “Invoice for Web Development Services – Project: ABC Website Redesign”)

The services or products you provided (e.g. “Website home page design – 15 hours @ £100/hour”, “SEO keyword research report – £500 flat fee”)

• The subtotal, taxes, and total amount due, in bold

• Any supporting documents your client needs, such as an approved time sheet, delivery confirmation, and milestone report

• The payment terms (e.g., “Payment is due within 14 days (1 August 2025). Late payments will incur a 2% monthly fee.”)

• The information needed to make payment (e.g. bank details)

• A brief, personal touch at the end, such as a thank-you note

How are contract invoices different from standard invoices?

Contract invoices and standard invoices serve the same basic purpose of requesting payment for work, but they differ in their levels of detail, context, and usage. Here’s a closer look at each type of invoice.

Contract invoices

Contract invoices are directly tied to formal contracts. They reference the terms of existing agreements, such as milestones, deliverables, and payment schedules (e.g. “50% due upfront, 50% due on delivery”). They often include contract numbers, project names, or specific clauses to reference the agreements. Contract invoices are common in industries such as construction, consulting, freelancing, and information technology (IT) services, where projects, long-term services, or custom agreements are standard.

With contract invoices, payment terms are strictly based on the contract, which might outline:

• Payments tied to milestones or project phases

• Complex terms such as retainers, partial payments, and performance-based billing

• Penalties or incentives for early or late payments

Contract invoices rigidly follow the terms of the contract, and adjustments typically require formal agreement between the parties. They’re often accompanied by additional documents to validate the work, such as time sheets, project milestone approvals, and delivery confirmations.

Standard invoices

Standard invoices are typically stand-alone documents without contractual obligations. They’re used for straightforward transactions such as retail sales, one-off services, and recurring monthly charges without formal contracts. They focus on general goods or services provided (e.g. “monthly cleaning services”) and don’t necessarily depend on predefined terms or project details. They also use simpler, more flexible payment terms, often just “due on receipt” or “net 30”.

Standard invoices rarely require supporting documentation, as they’re typically used in simpler transactions. They’re generally more adaptable and often used for quick, informal billing without much negotiation.

When should you issue a contract invoice?

Each contract has its own conditions for when invoices should be sent. Carefully review the contract to ensure you’re sending invoices on the agreed schedule, whether that’s up front, as each milestone is hit, or at another regular interval. If you’re slow to send an invoice, that can send the message that you don’t take your work seriously. Here’s an overview of typical times to issue this type of invoice.

When you reach a milestone

If your contract is built around milestones, send your invoice right after one is reached. For example, maybe you’ve just delivered the first draft of a design or finished framing a house in a construction project. Milestones keep big projects manageable for clients and ensure you’re not waiting until the very end to get paid.

On a regular schedule

For ongoing work (e.g. consulting, retainers, anything where you’re doing consistent work over time), it makes sense to bill at regular intervals. Monthly is the most common cadence, but some contracts might call for invoicing weekly or biweekly. Follow the agreed schedule and send invoices on time.

When payment conditions are met

Some contracts tie payments to specific conditions: delivering a final product, reaching a percentage of project completion, or just a set date. As soon as that requirement is met, send the invoice. These events are designed to keep everyone involved on track so don’t wait – prompt billing helps avoid awkward delays or misunderstandings.

After the client approves your work

In creative fields or other collaborative projects, clients might need to review and approve your work before payment. Once they sign off on a deliverable or a report, you should issue the invoice immediately. This maintains momentum and ties billing directly to approval.

At the start of your work together

For contracts that require an upfront payment or retainer, the invoice should be sent immediately at the start of the engagement. This arrangement is common for freelancers, consultants, and anyone who takes on a big project. Label the invoice (e.g. “Retainer Invoice”, “Advance Payment”) so there’s no confusion about the payment’s purpose.

At the end of the contract

Once everything is wrapped up, you’ll want to send a final invoice to collect on any remaining balance. This is also the moment to bill for any extra work outside the original scope.

If adjustments happen

Projects do shift and you might end up doing more work than originally agreed. If adjustments such as extra hours and added deliverables occur, issue a supplemental invoice as soon as that work is done. Explain what it’s for to prevent conflict.

On contractually agreed dates

If the contract spells out specific invoicing dates, such as first of every month, adhere to them. This will keep everything running smoothly and show your client you’re organised and serious about your work.

How can businesses make contract invoices clear and effective?

Drafting effective contracts means creating a document that’s easy to understand and leaves little room for dispute. Here’s how businesses can get it right.

Make payment terms explicit

Be specific with your payment terms: include a due date, any fees for late payments, and options for how to pay. Your terms might look like this: “Payment is due by 15 June 2025. A 1.5% late fee will apply for payments received after this date. Payment is accepted via bank transfer or credit card.”

Include any banking details or payment links necessary to complete payment.

Use detailed descriptions of charges

Break down the charges so the client knows exactly what they’re paying for. Instead of “development work”, try saying, “Custom feature development for e-commerce site (20 hours @ £100/hour).” If your charges are tied to milestones or phases, organise the items accordingly. Here’s an example:

• Phase 1 (Research and Planning): £2,000

• Phase 2 (Prototype): £1,500

This reassures clients and eliminates confusion about how you’ve calculated your totals.

Include important visuals

A visually messy invoice can be difficult to follow, even if the information is correct. Use headers, spacing, and bold text to call attention to important information. You might:

• Highlight the total amount due in bold or larger font

• Group related details together (e.g. client info in one section, payment terms in another)

• Use tables for itemised breakdowns

If you’re using invoicing software, most of these features are built in. If you’re creating invoices manually, a well-designed template can be helpful.

Reference the contract

Explicitly reference the contract so clients remember the agreed terms. Here are some examples:

• “This invoice reflects the agreed milestone payments as outlined in Contract 1234, Section 3.2.”

• “Payment is for additional hours worked beyond the original scope, approved via Change Order 5678.”

Proofread

Typos, maths errors, or incorrect details delay payment and can hurt your reputation. Before you hit send:

• Recalculate your totals

• Ensure the payment details (e.g. bank account number, payment link) are correct

• Verify that the invoice matches the terms of the contract

Be consistent with timing

If the contract specifies milestone billing, send the invoice as soon as you reach a milestone. For ongoing work, follow the agreed schedule. If the client doesn’t pay on time, send a polite but firm follow-up, such as, “Just a quick reminder that Invoice #1234 is due on 15 June. Please let me know if you have any questions.”

Consider using invoicing software

If you’re looking for an easier way to handle invoicing, Stripe Invoicing is a game changer. It’s built to make the entire process faster and stress-free for you and your clients. With Stripe Invoicing, you can:

• Create customized, branded invoices with your logo, colours, and personalised messaging

• Embed payment links directly into the invoice for payment via credit cards, Automated Clearing House (ACH) transfers, digital wallets, or other supported methods (as a bonus, customers pay three times faster on average when they pay with Apple Pay or Google Pay)

• Set up recurring invoices for ongoing work or subscriptions

• Schedule reminders for unpaid invoices

• Process payments in multiple currencies and via local payment methods for any international clients

• Track payment status (e.g. processing, paid) in real time on the Stripe Dashboard

How should you handle contract invoice adjustments or disputes?

When you handle adjustments or disputes over contract invoices, stay responsive and solution-focused. These situations can be tricky, but with a clear plan, you can resolve issues without damaging the client relationship. Here’s what to do.

Start with an open mind

When a client raises an issue with an invoice, don’t take it personally or jump to conclusions. Disputes are often caused by simple miscommunication or overlooked details, not ill will. Respond calmly and acknowledge their concern with something like, “Thanks for bringing this to my attention. Let’s review it together to ensure everything’s accurate.”

Ask for specifics

You need to understand what the client sees as a problem. Politely ask them to point out the specific item or charge they’re questioning so you can address it directly. Common disputes include the following:

• Scope: The client believes they were billed for work outside the scope of the contract.

• Rates or totals: They think the maths or pricing doesn’t match the agreement.

• Timing: They’re confused about when the work was done or when the invoice was sent.

• Unapproved charges: They see charges reflected that they didn’t explicitly approve (e.g. extra hours or materials).

Revisit the contract

Pull up your contract to double-check the details against the invoice. Look for whether billed items are consistent with the contract terms, whether the timeline aligns with what was agreed on, and whether there were any documented changes to scope or costs after the contract was executed. If you’re in the right, be ready to show how the invoice reflects the contract. If not, acknowledge the error and propose a fix.

Be transparent with supporting documents

Provide the client with any documentation that supports the invoice:

• Time sheets: For hourly work, show detailed logs of the time spent.

• Milestone approvals: Share emails or signed documents that confirm completed deliverables.

• Receipts or purchase orders: If materials or expenses are disputed, show receipts or purchase records.

Negotiate adjustments

If the client’s concern is valid – for example, you billed for extra work without obtaining formal approval – be flexible. Offer to adjust the invoice or provide a credit for future work. For instance, you might say, “You’re right. This charge wasn’t cleared ahead of time. Let me revise the invoice to remove it.” This shows you value the relationship and are willing to find a fair solution.

Document everything

If you make any changes to the invoice or agree to adjust the payment terms, document the action in writing. Send the client a revised invoice and confirm the details in an email. For example, you might write, “I’ve updated the invoice to reflect the agreed adjustment of £500 for additional work. The new total is £3,000, with payment due by [date].” Comprehensive records protect both you and the client in case questions arise later on.

Hold firm when appropriate

If you’ve followed the contract and can prove the invoice is accurate, don’t feel pressured to cave on every dispute. Politely but firmly explain your position and back it up with evidence: “The invoice reflects the additional hours discussed and approved in our meeting on [date]. Let me know if there’s anything I can clarify further.”

Offer a payment plan, if necessary

Sometimes disputes arise not because of the invoice itself, but because the client is facing cash flow issues. If they can’t pay the full amount straight away, consider offering a payment plan as a gesture of goodwill. Document these terms clearly, including payment deadlines and any interest, if applicable.

Know when to escalate

If the dispute drags on and you can’t reach a resolution, you might need to escalate. This could involve a third-party mediator or legal action, such as consulting a lawyer or filing a claim in small claims court. However, legal action should be your last resort – most disputes can be resolved without going this far.

Learn from the experience

View every dispute as an opportunity to improve your processes. After resolving the issue, reflect on what went wrong and how to prevent it in the future. Ask yourself questions like these:

• Were the contract terms too vague?

• Could you have communicated better about changes in scope?

• Should you have used more specific item descriptions on invoices?