How to Create an Invoice for Hours Worked: Step-by-Step Guide

Whether it’s tracking hours worked, setting your hourly wage, or creating an invoice, being an hourly rate worker is hard. If you’re one of the 50% of freelancers planning to charge an hourly rate in the next 12 months, you’ll need an invoice that makes it easy to log how you’ve spent your time.

As (self-proclaimed) experts on time tracking for freelancers and other hourly workers, we’ve created this quick guide to show you how to do exactly that.

This 101 on hourly rate invoicing will walk you through what to include, how to create one, and some handy tips on the invoicing process. We’ll also arm you with a free hourly invoice template to get started straight away!

TL;DR—Key Takeaways

• All invoices must include key data points such as your business information, client details, a unique invoice number, a breakdown of the products and services worked, and payment terms.
• For hourly rate workers, separate line items on your invoice describe each distinct product, service, project, or deliverable you’ve provided. This allows you and your client to keep a close eye on the pricing.
• A consistent invoicing template allows you to create customer-ready invoices tailored to your business and any local laws and regulations.
• For the best results, use time tracking software like Toggl Track to capture all your billable and non-billable hours in one place and automatically create professional hourly rate invoices.

What to include on an invoice for hours worked

Invoices are legal documents containing specific information to notify customers that their payment is due. No two business relationships are the same, so it’s important to customize your invoice template to fit your client and anything legally required in your country, territory, or region.

To help you build the perfect invoice, the main components to include are:

• Header: Clearly label the document as an “invoice” to help the recipient identify and process it quickly.
• Your business information: Display your name, company name, company/tax number, and contact information (such as phone number) prominently near the top of the invoice.
• Your customer’s business information: Include all relevant client details, such as the business name, number, and address, and a named recipient.

• Invoice number: Each invoice should have a unique reference number so you and the customer can identify it for processing or in the event of a dispute.
• Date of the invoice: An issue date supports tracking, processing, and payment schedules.
• Payment terms: Clearly state when payment is expected, any early payment incentives, or late payment charges.
• Payment details and methods: Provide payment instructions, such as your bank or online payment system details. This may be a traditional bank account number or a different system such as PayPal.
• A line item breakdown: Break down each product and service being charged into distinct line items.

• Hourly rate: If you’re charging on an hourly basis, clearly display the rate for each piece of work. This is especially important if you charge different rates for different services.
• Hours worked: State how many hours have been worked against each item and each hourly rate. If required, separate billable hours and non-billable hours to show the full picture of your time allocation.
• Taxes, fees, and discounts: Depending on your business, the client’s business, and local laws and regulations, be sure to include any taxes, fees, or discounts. This could be VAT, credit card charges, or bulk order discounts.
• Total amount due: Summarize the total amount due, both with and without taxes. This helps everyone track the full amount due.

Here’s what all of this might look like in Toggl Track. 👇

How to create your first hourly work invoice (step-by-step)

Hourly rate invoicing is easiest when you use a pre-built template with small customizations that reflect you and your business. These invoice templates come in all shapes and sizes, ranging from a basic Excel spreadsheet or Google Docs form to automated templates created by your time tracking software.

That’s why software like Toggl Track is so essential as part of your tech stack. We help hourly rate rock stars accurately track the number of hours you’ve worked on each project or client. Then, our built-in invoice generator automatically transforms those hours into a professional, customer-ready invoice that syncs straight to your accounting software. Pretty cool, right? We’ll explain more later on!

For now…whether you’re using Excel, Toggl Track, or anything in between, let’s walk through a step-by-step guide to create your first hourly work invoice.

1. Collect business information

First, get your admin sorted by collecting all the required business information. Start with your details before capturing everything you require from your client, including their legal client name, address, and invoice recipient address.

Pay attention to any local laws and regulations that apply here, ensuring you capture key details such as ID numbers, tax reference numbers, and VAT codes.

2. Complete or edit the invoice details

Next, add all the invoice-specific information you need, such as the invoice date, invoice number, and payment due date. When building your template, ensure this information is easy to read (usually, it’s at the top of the invoice) to help your customer process the invoice as quickly as possible.

3. Build your line items = number of hours x hourly rate

Now it’s time to get into the meat of your hourly rate invoice. Calculate each line item by multiplying the number of hours worked by the billable hourly rate you charge.

It’s best practice to create separate line items for each distinct product, service, project, or deliverable you’ve provided. This helps you and your client monitor the pricing closely to ensure everything’s correct.

4. Calculate the total amount due

Now each line item has a subtotal, add them together to form the total amount due for the invoice. If you’re doing this manually, we’d recommend re-checking your math a couple of times to ensure the total billable amount aligns with the work you’ve completed.

5. Don’t forget about payment terms

Every time you complete an invoice, double-check you’ve included the correct payment terms. This includes how long your customer has to pay, the payment methods accepted, and any late payment clauses.

Psttt! A tip from our team…

Toggl Track helps thousands of freelancers, agencies, consultants, small businesses, and enterprises track their hours worked every day. While time tracking might seem like an administrative overhead, mastering hourly billing is essential to boosting productivity.

Our top tip here is to track both your billable and non-billable hours. Yes, you read that right; track your non-billable hours, too. Here’s why:

• It helps demonstrate where you’re adding additional value that helps your clients grow their business. 🚀
• It shows how you spend your time and where you’re potentially losing money through lengthy admin and procrastination. 🗑️
• It helps you plan better for the future, whether that’s resource planning, project scheduling, or identifying tasks that you can automate. 📈

Tracking non-billable hours is all about making the most of your time, enabling you to make data-driven business decisions and, ultimately, work smarter, not harder.

Should you be charging an hourly rate?

Another question our users ask us at Toggl Track is whether users should charge an hourly rate or a fixed-fee basis. While everyone and every business is unique, consider these questions when deciding between hourly and fixed pricing. 👇

• How much do your projects vary? If you’re working on a mix of large, small, simple, and complex projects, charging by the hour is a good way to level the playing field. If your projects are all fairly similar, and you know how long they take, you could charge a fixed fee instead.
• How many clients do you work with? If you work with many clients, accurately monitoring the time you spend on each one can be difficult without time tracking software. Fixed weekly, bi-weekly, or monthly retainers will simplify your admin, but you risk inaccurate charging.
• How many hours a day/week/month do you work? If you work a limited number of hours, hourly rates control your clients’ expectations and ensure you make the most of your time. Fixed-fee contracts can incur scope creep, leading to difficult conversations if you run out of capacity.

Start creating professional invoices with Toggl Track

Creating professional invoices is essential for getting paid on time for your hard work. However, accurately tracking your time is what really sets the foundation for great invoicing and helps you monitor your cash flow, productivity, and business performance.

Toggl Track makes it easy for agencies, contractors, freelancers, and small business owners to turn their hours worked into hourly invoices in just a few steps. It’s as simple as this:

• Track your time using our Start/Stop timer or our automatic timer, then go to our Reports area and click “Create Invoice.”
• We’ll pre-populate your details and hours worked and then generate a unique invoice number for you. From here, manually edit the invoice to add any extra details your customer needs.
• To finish, click “Download Invoice” to receive a professional PDF straight to your device. You’re now ready to invoice your client and get paid for your work.

If you’d like to take your hourly rate invoicing to the next level, you can try Toggl Track for free—no credit card required!