What Is Time & Materials (T&M) Billing?

Time and materials (T&M) billing is a method where you charge for actual time and materials. You bill real labor hours plus the cost of materials used. The client pays only for work performed, so it fits jobs with uncertain scope or frequent changes.

How does T&M billing work?

T&M contracts let you bill for real labor hours and materials. You do not rely on a fixed contract price. This adapts to project changes and keeps billing clear. Many T&M jobs run on net-30 payment terms.

• Labor hours logged and billed at agreed rates
• Materials invoiced at cost plus an agreed markup
• Flexible structure for changing project scope
• Clear records for both contractor and client

T&M Invoice

Time & materials · billed from actuals

Demo Builders

Shops at Parmer Lane

	Labor — journeyman, 32 hrs @ $95	$3,040
	Labor — apprentice, 24 hrs @ $55	$1,320
	Materials — pipe, fittings, valves	$1,180
	Equipment — trencher rental, 2 days	$640
	Markup on materials & equipment (15%)	$273

Invoice total $6,453

Built from logged field hours and captured receipts — every line defensible.

Why do contractors choose T&M billing?

Many contractors choose T&M when scope, labor, or material needs are hard to predict. It keeps you fairly paid and cuts the risk of underbidding. Accurate labor tracking for T&M billing is what makes it work.

• Lowers financial risk on uncertain jobs
• Gives clients a clear record of labor and material use
• Helps protect profit on changing projects
• Builds trust through transparent records

How does T&M compare to fixed-price contracts?

A fixed-price contract locks in a lump sum. T&M billing adapts as the job changes. Each has trade-offs. T&M works best for service, repair, or renovation work where final costs are hard to predict.

Here is how the two methods stack up:

When should you use T&M billing?

Use T&M billing when the scope is not clear at the start. Remodels, service calls, and custom work fit well. It also helps when a client keeps adding changes mid-job.

Skip T&M when the scope is fixed and well defined. A lump-sum or progress billing approach is cleaner there. For larger commercial jobs, you may still need AIA billing forms.

• Scope is uncertain or likely to change
• The work is repair, service, or custom
• The client wants to pay for verified hours and materials
• You can track time and materials accurately

What are the challenges of T&M billing?

T&M billing is flexible, but it can get messy without good systems. Poor tracking leads to disputes, missed charges, or late payments. Pricing materials also depends on getting markup vs. margin right.

• Manual logging of hours wastes time
• Errors in labor or materials cut into profit
• Clients may question charges without proof
• Paper invoices often cause payment delays

How does software simplify T&M billing?

Contractor software like Werx connects field teams, accounting, and invoicing. You save time and capture every hour and material cost. Werx turns logged time into clean, billable invoices.

• Log labor hours with the Werx field app
• Add and track materials as billable items
• Sync invoices with QuickBooks Online
• Generate detailed T&M invoices instantly

Learn more about T&M billing software in Werx.

Key takeaways

• T&M billing means you charge for actual time and materials used
• It fits jobs with uncertain or changing scope
• Manual tracking is risky and often causes disputes
• Werx automates T&M billing with time tracking, QuickBooks sync, and flexible invoicing