Last updated: October 15, 2026
A contractor invoice is the document that turns completed construction and trade work into payment. Whether you run a general contracting firm or work solo as an electrician, plumber, or painter, your invoice has to spell out labor, materials, and any change orders clearly enough that the client pays without a round of questions. This guide walks through what belongs on every contractor invoice, how progress billing and retainage work, and the record-keeping habits that keep your cash flow steady.
Construction invoices get scrutinized more than most. A homeowner, property manager, or general contractor may route your invoice through an office that checks it against a contract or purchase order. Include these fields every time:
Vague one-line invoices ("remodel work — $8,500") are the most common reason contractor invoices get questioned or delayed. Itemize, even briefly.
Contractors generally bill one of three ways. The right choice depends on job size, duration, and how much uncertainty is baked into the scope.
| Billing method | How it works | Best for | Watch out for |
|---|---|---|---|
| Lump sum (fixed price) | One agreed price for the whole scope of work | Well-defined projects with clear plans | Scope creep eats your margin if change orders are not documented |
| Progress billing | Invoices tied to project milestones or percentage complete | Multi-week or multi-month jobs | Define milestones in the contract so "percent complete" never becomes an argument |
| Time and materials | Billable hours plus actual material costs, often with a markup | Repair work and jobs with unknown scope | Clients may want caps or not-to-exceed limits |
Progress billing is the standard on larger construction jobs: for example, 25 percent at demolition, 25 percent at rough-in, 40 percent at finishes, and 10 percent retainage released at final walkthrough. Spell the schedule out in the contract before work starts.
Break the job into lines a non-contractor can follow. A good rule is one line per trade task or phase, each showing quantity, rate, and amount:
Almost every job changes after it starts. Document each change in writing — what changed, what it costs, and the client's sign-off — and then invoice it as its own line item, ideally on its own invoice or a clearly marked section. Contractors who roll change-order costs silently into the next progress bill are the ones who end up arguing about them. A paper trail of approved change orders is also what protects you if a payment dispute ever goes further.
Retainage (sometimes called retention) is a percentage of each payment — commonly 5 to 10 percent — that the client holds back until the job is substantially complete. It is standard practice in commercial construction and increasingly common in residential work over a certain size. On your contractor invoice, show it as its own line: invoice the full earned amount, then subtract the retainage to arrive at the amount due now. Track retained amounts per job, because that money is yours once punch-list items are finished — many contractors leave it uncollected simply because they never invoiced for its release.
Cash flow kills more contracting businesses than slow seasons do. A few habits help:
A clean, itemized contractor invoice does more than request payment. It documents the job, justifies the price, and makes you look like the professional clients want to hire again.
Invoice on a fixed rhythm rather than waiting until the job ends. Weekly or biweekly invoicing works well for active jobs, and progress billing should go out the day a milestone is reached. Frequent, predictable invoices get paid faster because they never surprise the client's accounting department.
Retainage is a percentage of each payment, usually 5 to 10 percent, that the client holds until the work is substantially complete. Show it as its own line: bill the full earned amount, subtract the retainage, and invoice the remainder. Track retained amounts per job so you remember to bill for their release at final walkthrough.
It depends on your state. In many states, labor for improvements to real property is not subject to sales tax, but materials can be taxable depending on how the job is structured and billed. Rules vary widely, so check your state tax authority's guidance for contractors or ask your accountant before deciding how to present tax.
Yes, and most contractors do — a 10 to 50 percent deposit is common depending on the trade and job size. Label it clearly as a deposit or mobilization payment, apply it against the final invoice, and make sure the deposit terms are in your written contract before you ask for it.
Start with a polite written reminder referencing the invoice number and contract. Escalate to a firm final notice with a deadline. If that fails, options include mediation, small claims court for smaller amounts, or consulting a construction attorney — especially where lien rights may apply, since deadlines for those are strict.
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FreeSlip guides are for general information only — verify amounts, tax treatment, and legal requirements with your accountant or tax professional.