Last updated November 6, 2026
General information, not tax or legal advice. The rules depend on your country and your situation, so check anything with a tax or legal consequence with your accountant.
To invoice a monthly retainer, issue an invoice for the agreed fee on the same date each month, name the period it covers, and set the due date your agreement states. Bill work outside the retainer as its own line. Billing in advance, so payment lands before the month starts, is the safer habit.
What should a monthly retainer invoice say?
A monthly retainer invoice needs everything a normal invoice does, plus the period it covers, the agreement behind it and any extras. The period is the part people leave out, and a customer's accounts team can't code an invoice to the right month without it.
Here's an invented example, an invoice dated 25 March for April, from an agency billing its fee in advance.
| Line | Quantity | Price | Net |
|---|---|---|---|
| Monthly retainer: marketing support, April 2026, per agreement of 1 September 2025 | 1 | €2,000.00 | €2,000.00 |
| Additional hours in February beyond the allowance | 2 | €110.00 | €220.00 |
| Subtotal | €2,220.00 | ||
| VAT at 20% | €444.00 | ||
| Total | €2,664.00 |
What kind of retainer are you invoicing?
"Retainer" covers three different arrangements, and each is invoiced differently. Marketing agencies and consultants mostly mean the first two. Lawyers often mean the third.
| Type | What the client pays for | How to invoice it |
|---|---|---|
| Fixed fee | An agreed scope each month | The same amount every month |
| Hours bank | A set number of hours, with extras at an agreed rate | The same amount, plus a line for any extras |
| Money on account | An advance against future fees, held until earned | A payment request first, then invoices drawn against it |
Money held on account can be subject to client-money rules, so a law firm should check with its regulator before copying anything here. If you're still deciding between a retainer and billing by the hour, see consultant hourly vs retainer billing.
Should you bill a retainer in advance or in arrears?
Billing a retainer in advance is usually the better choice, because the money arrives before the work and a client who stops paying can be paused before you've lost much. This is what each looks like for December work.
| In advance | In arrears | |
|---|---|---|
| Invoice date | 25 November | 1 January |
| Due date | 1 December | 15 January |
| Days from first work to first payment | 0 | 45 |
| Extras | Billed on the next invoice | Billed on the same invoice |
| Best for | A fixed fee and an agreed scope | Work that varies, or clients whose systems need the work done before they'll pay |
A retainer invoice dated in November for December's work usually belongs to December in your accounts, not November. Tell your bookkeeper which way you bill, so revenue lands in the right month.
When does VAT fall due on a retainer invoice?
VAT on a monthly retainer generally falls due period by period, with an advance payment bringing it forward. Article 64 of the VAT Directive treats a service with successive payments as completed when each period ends, and Article 65 makes VAT chargeable when an advance payment is received. Member states can vary this under Article 66.
In the UK, HMRC's Notice 700 says a continuous supply has a tax point each time you issue a VAT invoice or receive a payment, whichever comes first (paragraph 14.3). So a retainer invoice issued on 25 March for April falls in the return covering 25 March. The same paragraph lets you issue one VAT invoice covering up to a year of regular payments, listing each payment's net amount, due date, VAT rate and VAT. That suits a client who wants one document.
How do you bill hours over or under the retainer?
Hours over or under a retainer are billed by a rule you agreed in advance, not one you settle each month. The rule needs three parts: what an extra hour costs, whether unused hours carry over, and when carried hours lapse.
Here's an invented example. An agency charges €2,000 a month for 20 hours. Extra hours are €110. Unused hours carry into the next month only.
| Month | Hours available | Hours worked | Result | Extra to bill |
|---|---|---|---|---|
| January | 20 | 16 | 4 carried into February | €0 |
| February | 24 | 26 | 2 over | €220 |
| March | 20 | 18 | 2 carried into April | €0 |
Over the quarter that's 3 × €2,000 + €220, or €6,220 net. At 20% VAT, the client pays €7,464 in all. Send the hour count with each invoice, because a client who can see the table doesn't query the line.
Wording for the agreement:
Retainer: €2,000.00 plus VAT per calendar month, covering up to 20 hours of marketing support. Invoiced on the 25th of the previous month and payable by the 1st. Unused hours carry into the following month only, then lapse. Hours beyond the allowance are €110.00 each, billed on the next invoice. Either party may end this retainer with 30 days' written notice.
The mistakes that make retainers leak
- A line that names the wrong month. A template copied forward with last month's name on it gets queried, and the query delays payment.
- Scope with no edges. If the agreement doesn't say what's outside it, everything ends up inside it.
- Hours nobody counts. You can't bill an overage you didn't record, and you can't defend the fee without the count.
- A fee that never moves. Put a yearly review in the agreement, and see the guide to rate increase letters for how to raise it.
- Terms that outrun the work. Net 30 on an in-advance retainer turns it into billing in arrears. Payment terms should fall due by the first of the month.
Setting up a monthly retainer invoice in ERPFlow
In ERPFlow, a recurring invoice bills a retainer on a schedule. It issues invoices and never collects money: nothing charges a card or takes a payment, so the customer pays as usual and you record it. Reminders on overdue retainer invoices are sent by hand.
Open one of the customer's invoices and choose Make recurring, or start from Invoices > Recurring. Set it to monthly, pick the first date and the payment term, then choose Email to each customer or Create drafts. A service with its price fills in the line. Each run makes one ordinary invoice per customer, dated the day it runs, which takes payments and reminders like any other and counts towards your plan's monthly invoice limit.
The lines repeat exactly, with no field for the month. Word the line so it stays true, such as "Monthly retainer: services for the calendar month following the invoice date", or use Create drafts and type the month and any extras into each draft before issuing it. Drafts are also how extras get onto the invoice, since there's no proration or usage billing. A customer on two schedules gets two invoices, never one combined.
A card in Projects has a time spent field, typed in hours and minutes, that adds up per project and per customer, so it can hold your count against the allowance. That time doesn't become invoice lines: hours are billed by entering a rate and a quantity on the invoice. Time tracking, including converting tracked time into invoices, is coming soon.