NFIB

Detailed Estimates and Invoices Help You and Your Customers
04/ 29/ 2003

Independent contractors of all types are constantly providing customers with job estimates and final invoices. Writing estimates and invoices should never be taken lightly, because customers examine these much more closely than you might think. In today's Workshop, Jeffrey Moses provides some tips on what to include to prevent confusion, disputes and resulting billing problems.

Customers like to know what they're paying for. The more informed they are about the specific charges for a job, the less likely they will be to question the bill.

McHenry Electric, a family-owned electrical contractor in Florida, breaks down their invoices into four distinct sections:

1. Materials (with columns for price and amount of each material used)
2. Description of Work (with space for a handwritten overall summary of work performed)
3. Other Charges (for any incidental work)
4. Labor (broken down by number of hours worked and rate per hour)

This format allows a complete description of the work done and has proven effective. For instance, McHenry Electric recently completed the installation of a water conditioning system for a large company. The water equipment was provided by a third-party contractor, while McHenry performed the electrical installation.

Rather than simply stating on their final invoice: "Installation of Water Conditioner," McHenry's invoice included all materials provided (including wiring, 4" x 4" post for electrical outlet near the conditioning equipment, outlet and all-weather cover, attachment to main electrical). The "Description of Work" section of the invoice stated the job. Other charges weren't incurred, so that section was left blank. Labor was stated in hours worked and the hourly rate. This comprehensive, detailed description of the work performed and materials used took the mystery out of the invoice, clearly spelling out details of all charges.

In addition to presenting information for the customer, such a format provides a permanent and complete record for the company. "When we include every item of work done, along with the date and materials used it provides both customers and ourselves a complete record for warranty purposes," says Clayton McHenry, owner and president of McHenry Electric.

McHenry Electric provides employees specially designed work orders that can be filled out onsite. Final invoices are written in the company's central office and then mailed to customers.

Virtually every type of independent contractor can design and write highly detailed estimates and invoices. For some types of businesses, the majority of charges will be for labor, with little or no materials included. When this is the case, detailed information can be given to the customer by breaking the labor charges into distinct descriptions of activities performed, along with the number of hours each activity took.

Charges can be broken down even further if desired. When you include great detail in your estimates and invoices, you will reduce the chances for questions and later problems, and you'll give your company a look of professionalism sure to impress customers.

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