How to calculate an hourly invoice
An hourly invoice is hours times rate, plus expenses, with tax on the subtotal and any deposit taken off at the end.
total = subtotal × (1 + tax rate); balance due = total − deposit
With the figures the calculator opens on: 18 hours at $95 with $140 of materials and 8.25% tax.
| Line | Amount |
|---|---|
| Labor, 18 hours at $95 | $1,710.00 |
| Expenses and materials | $140.00 |
| Subtotal | $1,850.00 |
| Sales tax at 8.25% | $152.63 |
| Invoice total | $2,002.63 |
| Deposit already paid | -$500.00 |
| Balance due | $1,502.63 |
Minutes to decimal hours
Rates are per hour, so time on the invoice has to be in decimal hours: divide the minutes by 60. Two hours and 45 minutes is 2.75 hours, not 2.45. Typing the clock time straight in is the most common way an hourly invoice comes out short.
| Minutes | Decimal hours |
|---|---|
| 6 minutes | 0.1 |
| 10 minutes | 0.17 |
| 15 minutes | 0.25 |
| 20 minutes | 0.33 |
| 30 minutes | 0.5 |
| 40 minutes | 0.67 |
| 45 minutes | 0.75 |
| 50 minutes | 0.83 |
If you bill in increments, say so in your terms: six minutes (a tenth of an hour) and fifteen minutes are the common ones. The timesheet adds up a week from clock times and does the conversion for you.
What an hourly invoice should show
- The dates or period the hours cover, and what the work was.
- Hours and hourly rate on their own line, with overtime on a separate line at its multiplier.
- Expenses and materials as their own lines, so they can be checked against receipts.
- Subtotal, tax, total, any deposit received, and the balance due.
- Your payment terms and a due date.
Not sure what to charge in the first place? The freelance rate calculator works backwards from the income you need, and the billable hours calculator shows how many hours you can really sell.
Show the hours, not a lump
The most common reason an hourly invoice gets queried is that it says 'labor, $1,710' and nothing else. The client cannot check it, so they ask, and now you are reconstructing two weeks from memory.
Hours and rate on their own line costs nothing and removes the question. If you kept a timesheet, the days can go on as separate lines and the query never happens at all.
The deposit comes off at the end
Tax applies to the work, not to the balance after a deposit. The order is: labor plus expenses, less any discount, tax on that, then subtract what has already been paid. Subtracting the deposit before tax undercharges the tax and is tedious to unpick later.
Expenses and markup
Materials bought for the job go on as expenses. Whether you mark them up is a pricing decision rather than an invoicing one, and if you do, apply the markup before the figure reaches this page. The markup calculator gives you the number.
Related calculators
- Contractor invoice calculatorLabor, materials and job costs into a total
- Project invoice calculatorA share of a fixed price, billed in stages
- Billable hours calculatorWhat is left to sell after time off and unpaid work
Questions people ask
How do I calculate an hourly invoice?
Multiply hours by your rate, add overtime at its multiplier, add expenses, take off any discount, apply tax to that subtotal, then subtract any deposit already paid.
Does tax apply before or after the deposit?
Before. Tax is charged on the work, not on the balance outstanding. Subtracting the deposit first undercharges the tax.
How do I convert minutes to hours for an invoice?
Divide the minutes by 60. 15 minutes is 0.25 hours, 30 minutes is 0.5 and 45 minutes is 0.75, so 2 hours 45 minutes goes on the invoice as 2.75 hours.
What should an hourly invoice include?
The period and the work done, hours and rate on their own line, overtime and expenses on separate lines, then subtotal, tax, total, any deposit received and the balance due, with your payment terms and due date.
Should I charge overtime?
Only if it is in what you agreed. Applying a multiplier the client has not seen is how an invoice gets disputed. If overtime is in your terms, put the multiplier on the invoice next to the hours.
Should materials be marked up?
That is a pricing decision, not an invoicing one. Many trades mark materials up to cover the time spent sourcing and collecting them. Apply the markup before the figure reaches the invoice.
How do I turn this into an actual invoice?
The button under the result carries the labor, overtime and expenses into the invoice generator as separate lines, with the tax rate already set.
What if I tracked hours per day?
Use the timesheet, which totals the week from clock times and carries each day onto the invoice as its own line. The client sees the days rather than one number.