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Running a construction business requires more than just the physical ability required to complete each project. Knowing how to invoice for labour and materials is one of the key additional skills you need.
Though the invoice format for labour charges is pretty straightforward, writing an invoice for manual labour involves calculating certain information which is not necessary on other types of invoice. It is important to get these calculations right, so it is clear and the customer understands exactly what they are paying for.
In this guide to setting out labour hire on invoices, we’ll show you how to create an invoice and what information it must contain, as well as run through the basics of job costing.
What is a manual labour invoice?
A manual labour invoice is a demand for payment for work in the construction sector. An invoice for manual labour is a document that you give to your customer after the work is completed, which breaks down the total fee being charged. Manual labour invoices include details of the work completed and the labour entailed in completing the work, as well as any materials used in the process.
Also bear in mind that your invoices are not only demands for payment, but a form of communication with your customers. That’s why it is important to always invoice in a professional manner, so your customers get the impression that your business is professionally run.
Job costing an invoice for manual labour
Before or during the creation of an invoice, complete the job costing process which informs you how much to charge for each element of the completed job you are invoicing for. The three elements of job costing are:
These three added together equal your total job cost which you then charge to your customer. Let’s quickly look at what each one involves.
Labour costs are wages paid by your business to employees and subcontractors that worked on the project. If you are self-employed and work alone, then it is only your labour that needs calculating.
Whether you charge an hourly or daily rate, the rate must be calculated according to the estimated time frame until the job’s completion. Subcontractors provide separate quotes for their labour, which you simply add onto the invoice and into the overall job cost.
Job costing an invoice for manual labour also includes the direct cost of any materials used. This could include anything from large machinery hired for a special task, or the likes of bricks and cement or nails and screws.
While labour and materials are a direct cost, overheads are all the indirect costs which are more difficult to calculate but are equally as important. Your overheads cover administration, depreciation of any equipment used, rental of equipment, facilities and utilities, and possibly insurance, legal fees and accounting fees.
Many businesses apply a blanket overhead percentage to each project, which will become easier to quantify over time as more jobs are completed. Alternatively, you can calculate a predetermined overhead rate using estimates of anticipated activity
How to create an manual labour invoice
There are eight pieces of information that should be included in the invoice format for labour charges, which are as follows:
your company name and contact details
your customer’s name and contact details
the unique invoice number
date of issue and payment due date
description of labour and materials used, with subtotals
overheads and any due taxes, with subtotals
total amount due
payment methods, plus any terms and conditions
It is a good idea to offer options for payment, which you can detail in the payments section. A recurring payments system like Direct Debit is excellent for jobs that require multiple invoices, even if the total amount due changes from month to month. It is also useful for one-off payments and ensures you get paid on time every time.
We can help
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