How To Bill For Consulting Services: An In-Depth Guide

If you’re new to consulting, you might wonder exactly how you should invoice clients for your services.  

Understanding the rates, when to bill, and what to include can be daunting, but getting client billing right is vital to ensure your clients are happy and receive the right payment for your skills without delay.

This article will discuss how to bill for your consulting services and provide some billing tips and best practices. Plus, you’ll also see some sample invoices for inspiration.

Let’s dive in.

How to bill for consulting services

We’ve created a step-by-step guide to billing for consulting services to help you get started.

Let’s take a look 👇

1. Track work hours

The majority of businesses use hourly billing for consulting services. So, keeping track of your work hours is critical for ensuring an accurate consulting invoice.  

There are a few different methods for tracking work hours, including:

• Manual time tracking with an Excel spreadsheet
• Recording time entries on a paper timesheet
• Time tracking software, like Toggl Track

It’s helpful to record billable and non-billable hours to track your productivity and ensure as few non-billable hours as possible. Only billable hours should be included on your invoice.

For reference, billable tasks include all client meetings, consulting work, and any other client work.  Non-billable tasks include internal meetings, rejected proposal creation, and general administrative tasks. 

2. Set billable rates

Consultations are billed differently from hourly rate tasks. To establish the right rate for your consulting work, you can use one of two methods: the 3x Hourly Rate method or the Annual Salary method.

Let’s check them out in detail 👇

3x Hourly Rate method

This is the simplest of the two methods and ideal for those with an established hourly rate to work from. It lets you match your consulting rate to your hourly service rate and avoids overcharging your clients.

The 3x Hourly Rate formula is: Original hourly rate x 3 = Consulting hourly rate

For example, if you currently earn $40 an hour as a content specialist, you would charge $120 for consulting services using this method.

The 3x Hourly Rate method is efficient, consistent, and easy to calculate. It ensures that costs (taxes, overheads, etc.) and profit margins are covered and competitive pricing is maintained.

However, this method doesn’t consider market conditions and overheads. These can change and may lead to underpricing and lost revenue.

Annual Salary method

This method is slightly more complex but is better suited for individuals transitioning to consulting full-time as freelancers or small business owners.

First, you must figure out the salary you’d like to make each year.  Let’s say $100,000, for example.  Divide the number by 52 to give you the weekly amount (around $1,932 for our example), and then divide that amount by 40 for the hourly rate ($48 for us).

Then, you add a markup percentage between 25% and 50% to cover profit, business expenses, taxes, and other overheads.  The right markup percentage will depend on your expenses and tax requirements, so some tweaking may be required.

In our example, we add a markup of 30% to the $48 hourly pay rate, giving us a billable rate of $62.50.

This method aligns with the rate a consultant would earn if they were employed full-time and provides comprehensive cost coverage, ensuring the markup covers all expenses.  

However, it is susceptible to inaccurate calculations, which could mean charging too much or too little, and it may not reflect the consultant’s skills well. It’s also an inflexible method that doesn’t factor in market change or differing client and project demands.

3. Create an invoice

Once you’ve completed services for a client, you need to create an invoice.  This could be on an ad hoc basis or weekly or monthly if you do regular work for them or are on a retainer.

Start by choosing an invoicing method that fits your needs.   You can create a simple invoice in Google Docs or Microsoft Word, choose and edit a consulting invoice template on Canva, use invoicing software, or create an invoice through your time tracking system or accounting software.

Whichever method you choose, there are a few things all invoices must include.  They are:

• Your company logo
• Your business contact information, including company name, physical address, phone number, and email address
• The client’s information as above
• The client’s tax information, such as the VAT number
• A unique invoice number
• The invoice date, usually when it is issued 
• Payment terms details, the payment due date, and late payment penalty
• Itemized details of all services provided, including the hourly consulting rate, total hours worked, the date services were provided, and the cost for each item
• The subtotal for the number of hours billed
• An itemized list of any additional charges like late fees and applicable taxes
• The total amount due for all services and charges
• Payment options, such as credit card, online payment, PayPal, or bank transfer

Ensure you double-check everything before you send it to the client to minimize the likelihood of invoice disputes.

Pro tip: We know sending your first consultant invoice may be daunting, so check out our article on How to Bill Clients for the First Time for more invoicing tips.

4. Share the invoice with your client

The last step is to send your finished invoice to the client.  Again, there are different ways of doing this.  Some of the main methods are:

• Email a PDF:  This is best for invoices created in Docs/Word or Canva.  It’s free and easy but doesn’t give clients a direct payment option or any way for you to track payments, which can lead to extra legwork.
• Send a link through invoicing software:  Most invoicing software lets you send invoices directly to the client.  This is helpful as it streamlines the invoicing process; clients can pay directly through the link, and you can automate payment reminders.  It can be expensive, though.
• Mail a physical copy: This old-school method involves printing the invoice and sending it to the client by post. It’s beneficial if the client requires hard copies for their records or doesn’t have access to digital methods, but it takes longer and isn’t eco-friendly.

Choose the best option for your company and client needs.

Billing tips and best practices for consultants

With the tips below, you and your clients can ensure a smooth billing process. You may even get paid faster!

1. Use time tracking solutions

The time spent filling out timesheets is non-billable, so you want to spend as little time as possible on it.

One way to reduce this administrative task is to use a time tracking solution like Toggl Track, which tracks your time automatically. This way, you’ll have an accurate record of your work hours to transfer to your invoice.

Some time tracking tools also offer invoice creation features, so you can input your time data and create invoices from one tool.

2. Send out invoices immediately

To avoid payment delays, sending your invoice as soon as a project is completed is best.  

Clients find it easier to review the invoice when the work is still fresh in their minds, reducing the need for time-consuming back-and-forth sorting out disputes. 

Plus, sending the invoice immediately helps ensure it doesn’t slip down your to-do list and you don’t forget to invoice for a task.

3. Request deposits

If you’re about to sign a long-term contract that will take several months to finish, consider requesting an upfront deposit from your client instead of invoicing at the end.

Ask for 25 to 50% of the bill to help you maintain a healthy cash flow. This will ensure you receive at least partial payment for your work, helping to mitigate potential financial risk.

4. Be polite in your communications

While it may sound like we’re stating the obvious, politeness in all invoice communications can help build better client relationships and ensure you get paid for your services faster.

Personalize your invoice with a quick thank-you message, and always be friendly and polite, even if you’re chasing a late payment.

5. Accept multiple payment methods

Accepting different payment methods makes it far easier and more convenient for clients to make payments, which means you get paid faster. 

You should offer as many popular payment methods as possible. If you notice many clients requesting a payment method you don’t yet offer, it’s also advisable to look into it.

Sample consulting invoice

Are you unsure what your consulting invoice should look like? We’ve gathered some examples of free consulting invoice templates from around the web.

Check them out 👇

Invoice Simple

This basic and straightforward invoice template from Invoice Simple is available for Microsoft Excel and Word. It has sections for subtotals, discounts, tax rates and some guidance on what to include.

Canva

This invoice template from Canva has a more eye-catching design while remaining straightforward and clear. The template can be edited directly in Canva and downloaded as a PDF or a Microsoft Word file. 

Wave

This invoice template from Wave has plenty of space to add services provided, making the important information stand out at the top. The template is available for Microsoft Excel and Word, Google Docs and Sheets, and PDF.

FAQ about billing consulting clients

We’ve compiled the answers to some common questions to provide deeper insight into billing for consulting services.  Check them out below 👇

How do you bill someone for consulting?

The main methods for billing for consulting are:

• Hourly pricing, where you bill for each hour worked at a set rate
• Fixed pricing, where you’re paid a fixed amount for each service regardless of how long they take
• Retainer, where you bill a set amount at a particular cadence (usually monthly, quarterly, or annually) regardless of how much work you do in that timeframe
• Tiered pricing, where you offer different packages or pricing tiers depending on the scope of work, letting clients choose the model that best fits their budget and requirements

What should be included in a consulting service invoice?

Every invoice should include the following:

• Company logo
• Business name and contact information
• Client’s contact and tax information
• Invoice number and date
• Payment terms and due date
• An itemized list of services and charges
• Amount due

What are typical payment terms for consultants?

The main payment terms for consultants are:

• Lump sum payment, received when the project is completed
• Hourly rate payment, billed as needed
• Monthly rate payment, billed monthly
• Progress payments, paid for when milestones are reached

What is the best time tracking and invoicing software for consultants?

The best time tracking and invoicing software for you will depend on your specific needs. However, some things you should consider when deciding which tool to use are ease of use, GDPR compliance, and features like billable and non-billable hours tracking and expense tracking.

Some top tools to check out are Toggl Track, Hubstaff, and Clockify. For more information, see our article on the best time tracking apps for consultants.

The bottom line

Efficient client billing practices are the cornerstone of success in consulting businesses.  They help ensure you are paid properly for your time and expertise and your clients receive clear, professional invoices without extra time spent on payment queries and follow-ups.

Billing clients for consulting services doesn’t have to be complicated, and using a tool like Toggl Track simplifies the process from the get-go. Ready to take your client billing to the next level?  Sign up for Toggl Track today for free.