Contractor Invoice: How to Bill Labor, Materials and Progress Payments

Billsato · Updated 9 October 2026 · 6 min read

A contractor invoice bills a customer for building, repair or trade work. Beyond the usual invoice details, it should name the job site, split the charges into labor, materials and other costs, and show any deposit, progress payment, change order or retention. The clearer the breakdown, the fewer questions you get before you are paid.

This guide covers what to put on a contractor or construction invoice, a worked example, how progress billing and retainage work, and the extra rules that apply in the US, the UK and Australia.

What makes a contractor invoice different

A designer bills for a finished file. A contractor bills for hours on site, materials bought on the customer's behalf, equipment, subcontractors, permits and disposal, often over weeks or months. Customers want to see where the money went, lenders and property managers may need it itemised, and the work often changes as it goes. A good contractor invoice reflects all of that without becoming hard to read.

What to include on a contractor invoice

1. Your business details: name, address, phone, email, and your trade license or registration number where your area requires it.
2. The customer: name and billing address, which may differ from the job site.
3. The job site address and a project name or reference.
4. Invoice number, invoice date and due date.
5. Reference to the agreement: the estimate, contract or purchase order the work is based on.
6. Labor: hours and rate per trade or worker, or a fixed price per task.
7. Materials: each item with quantity and unit price. If you add a markup, decide whether to show it or include it in the price, and be consistent.
8. Equipment, subcontractors, permits and disposal fees, as separate lines.
9. Change orders: any approved extra work, with its own reference.
10. Deposits and earlier payments already received, deducted from the total.
11. Tax: sales tax, VAT or GST as it applies to your trade and location.
12. Payment terms and methods, including any agreed late fee.

Contractor invoice example

Above the table: your details, the customer, "Job site: 18 Cedar Lane", the project name and the contract reference. Below it: payment instructions and terms.

Progress billing and retainage

On larger jobs you don't wait until the end to invoice. With progress billing you invoice as the work advances, either by milestone (foundation, framing, roof) or by the percentage complete each month. Many contracts use a schedule of values, a list of every part of the job with its price, and each progress invoice shows how much of each part is done.

Retainage (called retention in the UK and Australia) is part of each progress payment that the customer holds back until the job is finished, as security for completion. It is typically 5 to 10 percent. Show it on the invoice so both sides can track it:

When the job is complete, send a final invoice for the retained amount, according to the release terms in your contract.

Change orders

Extra work is where most invoice disputes start. Get every change approved in writing before you do it, give it a number, and list it as its own line on the invoice. A customer who signed "Change order #2: extra window opening, $480" rarely argues with the invoice line that matches it.

Country notes

United States

• Lien waivers: on many projects the customer or general contractor asks for a lien waiver with each payment. A conditional waiver takes effect only once payment clears; an unconditional waiver takes effect when you sign it. Sign unconditional waivers only after the money is in your account.
• Licensing: many states require contractors to be licensed and some require the license number on contracts and estimates. Adding it to your invoices costs nothing.
• Sales tax on materials and labor differs from state to state and between new construction and repairs. Ask your state's revenue department or an accountant.

United Kingdom

• Construction Industry Scheme (CIS): contractors deduct tax from subcontractors' labor payments and pass it to HMRC: 20% if you are registered for CIS, 30% if you are not, and nothing if you have gross payment status. The deduction applies to labor, not materials, so show materials separately on your invoice.
• VAT domestic reverse charge: since 1 March 2021, many building services supplied between VAT-registered businesses in the CIS fall under the reverse charge. The invoice must say so, for example "Reverse charge: Customer to account for VAT to HMRC", and show the VAT rate, but you don't collect the VAT yourself.

Australia

• If you are registered for GST, a customer can ask for a tax invoice. It must show your ABN, and from $1,000 the buyer's identity or ABN as well.
• Each state has security-of-payment laws with their own rules for payment claims and deadlines. Check the rules for the state where the work is done.

Invoicing from the job site

The best time to invoice is right after the work is signed off, while the customer is still looking at the finished job. Keep your materials receipts and hours together as you go, so the invoice takes minutes rather than an evening. Billsato's invoice generator works in the phone's browser with no app to install and no sign-up: add the job site and project reference in the extra fields, list labor and materials as separate lines, deduct the deposit as an amount paid, and download the PDF to text or email to the customer.

Tips to get paid faster

• Agree on a deposit before you order materials, especially for special-order items.
• Invoice the same day the work, or the stage, is finished.
• Use short payment terms, such as due on receipt or 15 days, unless the contract says otherwise.
• Accept several payment methods and put the details on the invoice.
• Follow up as soon as the due date passes. Our payment reminder guide has wording you can use.

For the basics that apply to every invoice, see what an invoice is and what it must include.

Sources

• GOV.UK: Construction Industry Scheme (CIS)
• GOV.UK: VAT domestic reverse charge for building and construction services
• Australian Taxation Office: Tax invoices
• Corpay: Conditional vs unconditional lien waivers