Hourly billing offers many benefits to freelancers across various industries. As a freelancer, you provide excellent service to your clients and, as a result, you expect to be compensated for each hour you work. By precisely tracking the billable hours, an accurate hourly invoice will help you visualize and present every detail of your work through a formal invoice.
There are a number of freelancing applications for which an hourly invoice will be well suited. For freelance operations that rely on services rendered, such as landscaping or digital marketing, for example, hourly billing is absolutely necessary to charge clients accurately based on prices that reflect the quality of the work that you do so proudly.
A well-designed invoice establishes and maintains your company's credibility, so it’s important to understand for which applications an hourly invoice is best suited. If your freelance operation works on a services-based business model, an hourly invoice may be the billing solution that’s right for you.
An hourly invoice informs your client of the cost of their freelancing project, the number of hours completed for each billable activity, and the payment due for each of the billable activities outlined in the document.
Depending on your software familiarity and design experience, the Microsoft Office and Google suites provide an array of document development tools and templates that you can use to create your hourly invoice. The needs of your freelancing business and clients will also be important factors to consider when building your hourly invoice, and you should explore multiple options for creating an invoice that is capable of streamlining your payment process all around.
Fortunately, there are several options available for freelancers to choose from for their invoicing needs, all of which take into account a variety of important factors that contribute to freelance business development, including software familiarity, design experience, affordability, and functionality.
Word processing softwares such as Microsoft Word and Google Docs provide users with the fundamental features necessary to build basic invoices without complex cost breakdown and list itemizations, including placements for elements such as unique invoice details, contact information, and subtotals/totals.
With spreadsheet software such as Microsoft Excel and Google Sheets, the complicated task of performing complex cost calculations is made automatic, leaving freelancers with the flexibility to dedicate more time and resources to the overall design of their branded invoice or to update the document with other invoice-specific information related to transactions.
Many freelancers and contractors work on an hourly basis. If this sounds like your business model, your invoice should reflect all elements of your work. In the invoice, you should clearly define the services you’re billing for, the time spent on each of your activities, and the price you're charging per hour for each service. You'll need to keep track of how many hours you've worked for each client and bill clients timely at the conclusion of a predetermined cycle, such as weekly, bi-weekly, or monthly.
Using invoice management software may greatly improve the invoicing process and allow you to personalize your bills, which can help you build long-term customer connections through a user-first client experience.
If your freelancing operation is currently operating on a services-based business model, the process of gathering the payment details necessary to inform your hourly invoices should be simple. As you work to establish your prices, take into account how much time and effort go into the fulfillment of your services—don’t sell yourself short when it comes to your craft.
To bill for hourly work, you'll need to figure out the hourly pay rate per task as well as establish descriptions for all performed activities. To accomplish this, keep track of the hours spent on a particular task, either manually or by utilizing a spreadsheet software. You can also use time-tracking software to keep track of how many hours you've spent on billable activities. Your hourly invoice should then arrange the work in an itemized format that reflects hours worked and states the date on which payment is required.
Calculating business expenses and setting your hourly rates go hand in hand. To ensure all additional costs are accounted for in the final invoice, make a list of all the associated costs you'll incur from your project with a given client in addition to primary services.
After you've finished estimating additional company expenses and determining an hourly rate, you can begin crafting the formal invoice file. First, calculate the hourly rates by the total billable hours or hours worked for a given client. Then, include the number of hours you spent on the project, your hourly rate for service, and the total for that project.
Make sure the payment options you accept and all other relevant payment details are placed prominently on your final invoice document. If there are any additional fees associated with a particular payment method, don't forget to list those somewhere on the invoice, as well.
To create your hourly invoice, you have a number of options to consider when choosing the document development program that’s right for your payment workflow. Depending on the needs of your freelance operation and your clients, as well as your existing payment workflow, your chosen document development program should be capable of creating an hourly invoice that effectively represents the cost breakdown of your services while also presenting all relevant transaction and business details prominently on the document.
Depending on the level of functionality you desire from your hourly invoice, your chosen document development program should give you the tools necessary to create an hourly invoice that accurately reflects your brand while also streamlining your payment process.
For freelancers who desire the ease-of-use of a word processor for the creation of their invoices, a document development program such as Microsoft Word or Google Docs would serve as a manageable, affordable option. The basic customization tools offered by both programs allow users to easily brand their materials according to their organization’s unique color scheme and font family. For freelancers in need of more guided direction for creating their hourly invoices, both programs offer a selection of pre-designed templates that can easily be updated in-platform. For easy sharing with clients, both programs support multi-format exporting, and with Google Docs, readable invoices can be shared digitally to clients with Google accounts.
Alternatively, freelancers who wish to further streamline the payment process may opt to utilize the formulaic functionality of spreadsheet software such as Microsoft Excel or Google Docs. Both platforms provide users with basic customization tools for document branding, as well as a modest selection of pre-designed templates that can be updated according to your unique invoicing needs. Through powerful formula functions, freelancers can automate tasks such as totaling figures—a feature that comes in handy particularly with more complex cost breakdowns.
If you’re a beginner freelancer who has yet to establish their hourly rate, the task of placing value on the work that you do can seem difficult. However, it’s a necessary component of any hourly invoice—and absolutely essential to ensuring you get paid for your services.
When establishing your hourly rate, there are a number of important factors to consider, all of them intricately connected to your freelance business operations plan, your payment process, and the type of work that you do. As you think about how much your time and services are worth billing for, consider some of the following elements:
When it comes to your competition within the job market, you need to consider how much your competition is charging for similar services. Do your research to avoid over- or undercharging your clients, and make adjustments depending on your unique business model and offerings. Price yourself according to the market to position yourself as economically and professionally competitive within the market.
As you work to establish your hourly rate, it’s essential to keep your bottom-line and return-on-investment in mind at all times. To get this figure, calculate both the time and money you spend in order to fulfil a given project with a client. These figures should take into account the amount of money you spend on materials and the time spent performing project-specific activities, such as traveling or building.
From there, you can establish a base-line figure for determining your hourly rate that ensures you make a profit from each transaction.
You may also determine your hourly rate by targeting an annual salary. To do this, identify a target salary that is realistic to the capacities of your freelancing operation. Don’t overcharge your clients—instead, use this method to calculate an hourly rate that reflects the competition of your industry market, and then adapt according to the resources of your freelancing operation. After calculating an estimate for your total annual expenses, set an hourly rate that reflects your target annual salary.
By the end of this exercise, your profit margins may not be as you expected, but these calculations will provide you with important insights for establishing your initial rates and, ultimately, reevaluating your payment workflows as your freelancing business continues to grow.
Another key component of establishing an hourly rate for your invoices is the billable hour—or the amount of time that you charge a client for a given task or activity associated with the project.
With a typical 9-to-5 job, billable hours are standard across the board: eight hours a day, 52 days a week for 52 weeks a year. As a freelancer, you enjoy the freedom of flexibility scheduling and, as such, added flexibility in the payment process. Strive to capture an accurate representation of the amount of time dedicated to each of your provided services to come up with an hourly rate that truly represents the value of the work you provide clients.
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