Time and Materials Invoice Template: Free Template for Contractors

By Nicole Hullihen, former SaaS Chief Operating Officer and Microsoft MVP · Updated October 25, 2026

Some jobs can't be priced up front: repairs where you don't know what you'll find, small jobs with unclear scope or extra work discovered during a project. Time and materials billing lets you charge for what the work actually takes. But T&M invoices invite questions, so they need to be clear, accurate and backed by records.

This guide includes a free time and materials invoice template and explains when to use T&M billing, how to set rates and markup, what backup to include and how to avoid disputes.

What Is Time and Materials Billing?

Time and materials (T&M) billing charges the customer for actual labor time at agreed hourly rates and actual materials at cost plus an agreed markup. It's different from fixed-price billing, where the customer pays an agreed total regardless of the actual time and materials used.

When to Use T&M Billing

• Repairs and service calls where the problem isn't known yet.
• Remodels or renovations with hidden conditions.
• Small jobs where a detailed estimate costs more than the job.
• Extra work during a fixed-price job, when the contract allows it.
• Ongoing support or maintenance work.

For changes on fixed-price jobs, document the extra work with a change order. See the construction change order form.

Free Time and Materials Invoice Template

Labor

Materials

Equipment and Other Charges

Totals

Payment terms: __________  |  Accepted methods: __________  |  Questions: [name, phone, email]

Setting Labor Rates

Your T&M labor rate should cover more than wages. It needs to include labor burden (payroll taxes, workers' comp, benefits), overhead and profit.

See how to track labor costs by job and direct vs. indirect costs.

Materials Markup

Most T&M agreements allow a markup on materials to cover purchasing time, handling, storage and risk. State the markup in your agreement or quote before work starts.

Keep receipts for every material purchase and tie them to the job. See the receiving log for deliveries to the shop.

Not-to-Exceed Amounts

Customers often feel uneasy about open-ended T&M billing. A not-to-exceed (NTE) amount caps the total unless the customer approves more. If the job is approaching the NTE, stop and get written approval before continuing.

Backup Documentation

• Time records: daily hours by worker, with start and end times.
• Material receipts: invoices or receipts for everything billed.
• Daily notes: what was done each day.
• Photos: before and after.
• Customer sign-off: signed time sheets or service reports.

Commercial customers often require backup with every T&M invoice. Even when they don't, keeping it organized makes disputes easy to resolve. See the field service report and construction daily report.

Getting Customer Sign-Off on Time

Having the customer or their representative initial daily time sheets prevents most arguments about hours later.

Tracking Time Accurately

T&M billing depends on accurate time. Use a time clock that records hours by job, so invoice hours match what workers actually clocked. For hourly employees, travel between job sites during the workday counts as work time, so decide in your agreement how travel time is billed. See travel time pay for hourly employees.

T&M Agreement Basics

Before starting T&M work, put the terms in writing:

• Hourly rates by role, and after-hours rates.
• Materials markup.
• Equipment and other charges.
• Not-to-exceed amount, if any.
• Backup documentation provided.
• Billing frequency and payment terms.

Have an attorney review your standard agreement or terms.

Invoicing Frequency

For longer T&M jobs, bill weekly or every two weeks instead of waiting until the end. Smaller, regular invoices are easier for customers to review and pay, and they protect your cash flow. See project billing.

Example: A Plumbing Company

A plumbing company billed T&M repairs with a single line: "Labor and materials, $1,240." Customers often called to question the bill, and payments slowed. The owner switched to an itemized T&M invoice with hours by technician, materials with markup and the signed service report attached. Calls about bills nearly stopped, and customers paid faster.

Common T&M Invoice Mistakes

• One-line invoices with no detail.
• Hours that don't match time records.
• Missing receipts for materials.
• Going over the not-to-exceed amount without approval.
• Unclear rates or markup not agreed in advance.
• Waiting too long to invoice.

T&M Invoice Checklist

Sample Completed T&M Invoice

This sample uses made-up rates and costs. Sales tax treatment of labor and materials varies by state; ask your accountant.

T&M vs. Cost-Plus

Both pass actual costs to the customer. T&M usually uses set billing rates; cost-plus usually reimburses actual costs and adds a fee.

Weekly T&M Summary for Longer Jobs

Send this summary with each invoice so the customer always knows where the job stands against the not-to-exceed amount.

Handling T&M Disputes

1. Listen to which charges the customer questions.
2. Pull time records, receipts and daily notes.
3. Explain each item calmly, with documentation.
4. Correct genuine errors right away.
5. Ask the customer to pay the undisputed amount.

For overdue balances, see the past due invoice letter.

T&M Work on Fixed-Price Projects

Sometimes extra work on a fixed-price job is done on a T&M basis because the scope is unclear, such as repairing hidden damage. Get written approval first, track that work separately with its own job code and bill it as a change order with T&M backup. Mixing it into the main job makes both harder to track.

Getting Paid Faster on T&M Work

• Agree on terms and rates before starting.
• Get daily time sign-off.
• Invoice weekly with backup attached.
• Make payment easy with online options.
• Follow up promptly on unpaid invoices.

Common Questions About T&M Invoices

• Do I bill travel time? Only if your agreement says so; state it clearly.
• Can I bill for time spent buying materials? If your agreement allows it.
• Should I show my markup? Many contractors show it; some agreements require it.

T&M Time Sheet Template

A daily T&M time sheet, signed by the customer or their representative, is the strongest backup for your labor charges.

Materials Log for T&M Jobs

Log materials as they're purchased so nothing is missed at invoicing. Materials pulled from shop stock should be logged at your cost too.

Writing Work Descriptions

Clear descriptions make each hour on the invoice easy to understand.

T&M Invoice Policy

T&M Invoice Quick Tips

• Agree on rates first.
• Get daily time sign-off.
• Itemize everything.
• Watch the not-to-exceed amount.
• Invoice weekly.

Setting Up T&M Rates by Role

Publish your T&M rate sheet and attach it to agreements so customers know rates before work begins. Add it to your price list.

Minimum Charges and Trip Fees

Short service calls still cost you drive time, setup and administration. Many contractors use a minimum charge, such as one hour, or a trip fee to cover those costs. State minimums and trip fees in your rate sheet and on the invoice so they don't surprise customers.

Reviewing T&M Profitability

T&M work should be profitable, but only if your rates cover all costs. Every quarter, compare T&M revenue with the actual labor cost, materials cost and overhead for those jobs. If T&M margins are thin, review your rates, markup and how much time goes unbilled, such as shop time and parts runs. See labor cost percentage.

Getting Started This Week

1. Set your T&M rates and materials markup.
2. Create a T&M agreement or terms page.
3. Print daily T&M time sheets for crews.
4. Start logging materials by job.
5. Send your next T&M invoice with full backup.

Commercial Customer Requirements

Commercial and property management customers often have strict T&M billing rules: approved rate sheets, PO numbers on every invoice, signed work tickets, receipts for every material and specific invoice formats or portals. Ask for their requirements when you set up the account and follow them exactly. Invoices that don't match their rules are often sent back unpaid.

Sales Tax on T&M Invoices

Whether labor and materials are taxable depends on your state and the type of work. Some states tax materials but not labor, some tax both and rules for construction can differ from repairs. Ask your accountant or state tax agency, and set up your invoices to show taxable and nontaxable items separately where needed.

Keeping Your Team Consistent

Everyone who records time and materials should follow the same rules: what counts as billable, how to describe work, how to round time and how to log materials. Write the rules down and review time sheets weekly for consistency before invoicing.

Converting T&M to Fixed Price

After you've done similar T&M jobs several times, you may know the work well enough to offer a fixed price. Customers often prefer a set price, and fixed pricing rewards your efficiency. Use your T&M records to see typical hours and materials, add a cushion for variation and offer fixed pricing for those common jobs while keeping T&M for unknown work.

Your time sheets and invoices from past T&M jobs are the best data you have for building those fixed prices accurately.

Protecting Yourself on T&M Jobs

• Get the T&M terms signed before starting.
• Keep customers updated on running totals.
• Stop and ask before exceeding any cap.
• Document hidden conditions with photos.
• Invoice regularly so balances never get large.

These habits keep T&M work profitable and customers comfortable with paying for what the job actually takes.

Customers who trust your T&M billing are more likely to call you again for the next job, even when the scope is uncertain.

Clear terms, accurate records and itemized invoices are what make that trust possible on every job.

Start with your next T&M job and use the template from day one.

Keep it simple and consistent.

Your customers will notice.

Bill with confidence.

Bill Accurately With Updoot

Updoot's employee time clock records hours by job, and the invoice generator builds clear invoices you can send right away.

Sources

• U.S. DOL: Fact Sheet #22, Hours Worked Under the FLSA

Frequently Asked Questions