Subcontractor invoices are one of the most administratively messy corners of running a creative agency. A freelance editor finishes a job and invoices three weeks after delivery. A contractor uses a different tax description on every bill. Someone submits an invoice without a purchase order number and the accounts system rejects it. None of these situations are disasters on their own. But across a project schedule, they compound quickly into cash flow delays, accounting errors, and strained working relationships.
A written subcontractor invoice policy eliminates most of that friction before it starts. It tells every contractor exactly how to bill you, when to bill you, and what information every invoice must carry. The policy costs an hour to write. It saves that time back on every single project.
What a subcontractor invoice policy actually covers
The policy is a short, practical document. It doesn't need to be a legal instrument. Its job is to answer the questions a freelancer might ask before they submit their first invoice, so they don't have to ask them at all.
At minimum, the document should specify:
- The invoice submission window (e.g. within 5 business days of project completion or milestone sign-off)
- Required fields: ABN, date, invoice number, description of services, agreed rate, GST line if applicable
- Where to send the invoice (a single accounts email address, not the project manager's personal inbox)
- Your payment terms (net 14, net 30, or whatever your standard is)
- Whether a purchase order number is required before an invoice will be processed
That's the core. Everything else you add is a refinement, not a requirement.
Setting the invoice submission window
One of the most common cash flow disruptions in agency work is a contractor who invoices late. If your own client is on 30-day terms and your subcontractor submits an invoice 25 days after delivery, you're paying out before you've been paid. That's a working capital problem, not an accounting one.
A firm submission window solves it. Five business days from delivery is reasonable for most project-based work. For ongoing retainer work, a fixed billing date (say, the last business day of each month) is easier for both parties to manage. State the window clearly in the policy, and include a line that late invoices may be held for the following payment cycle. Most contractors will submit on time once they understand that the alternative is waiting an extra fortnight.
This connects directly to how you structure the broader relationship. If you've covered deliverables and timelines in a well-drafted subcontractor agreement, the invoice policy becomes a natural extension of that document rather than a standalone surprise.
GST, ABN, and tax compliance
Australian agencies must withhold 47% from any contractor payment if the contractor doesn't provide a valid ABN. That's the withholding tax rule under the ATO's ABN withholding requirements. The simplest way to avoid that situation entirely is to require an ABN on every invoice and to collect a copy before the first engagement begins, not after.
GST is a separate question. Not every contractor is GST-registered, particularly those earning under $75,000 annually. Your invoice policy should state clearly that contractors are responsible for applying GST correctly to their invoices. If a contractor is registered, the invoice must show a GST line item and the words "Tax Invoice." If they're not registered, the invoice should reflect that. You're not responsible for correcting their tax treatment, but a policy that explains what you expect avoids the awkward back-and-forth of returned invoices.
Purchase orders and approval chains
Smaller agencies often skip purchase orders entirely, relying instead on email confirmation that work has been approved. That works until a project manager leaves, a client disputes a scope item, or an invoice arrives for work nobody recognises.
A simple PO system doesn't need to be complex. It can be a number generated in a spreadsheet, emailed to the contractor before they start, and referenced on their invoice when they submit. The policy should state that invoices without a valid PO number will be returned unpaid. This single rule stops a lot of confusion, because it forces the approval to happen before the work, not after.
If your studio manages multiple projects simultaneously, this also gives your accounts team a clean audit trail. Every payment links to a documented approval. That matters at tax time and matters even more if a dispute reaches the point of formal resolution.
Late payments and what your policy says about them
A subcontractor invoice policy isn't just about what you require from contractors. It should also communicate what contractors can expect from you. If your payment terms are net 30, say so. If you process payments in weekly runs on a Thursday, say that too. Contractors who know when to expect payment are less likely to send chasing emails or inflate their rates to account for cash flow uncertainty.
You don't need to include penalty clauses in an invoice policy. Save those for the subcontractor agreement. The invoice policy is operational, not legal. Its goal is clarity, not enforcement.
For the agency's own obligations on late payment more broadly, it's worth having a written late payment policy that covers both the client side and the contractor side of your cash flow. The two documents work together.
Formatting the document itself
The policy doesn't need to be long. One to two pages is enough. Use plain language, not legal jargon. If a contractor has to read a sentence twice to understand what you're asking for, rewrite the sentence.
Include a sample invoice at the end of the document. One example of a correctly formatted invoice, with all required fields labelled, will save more confusion than three paragraphs of description. Contractors can copy the structure and adapt it to their own invoicing tool.
Send the policy to every new contractor before the engagement begins, alongside your subcontractor agreement and any relevant project documentation. Don't attach it as a surprise to the first payment query. It's an onboarding document, not a response to a problem.
When to update the policy
Review the policy annually, or whenever a recurring invoicing problem reveals a gap. If the same question comes up from three different contractors in one year, the policy probably doesn't answer it clearly enough. Add a line. The document should get cleaner and shorter over time as the edge cases get absorbed into the standard process.
Tax thresholds and ATO requirements do change. The current ABN withholding rules and GST registration thresholds are worth verifying each financial year against the Australian Taxation Office's current guidance rather than relying on figures embedded in a document written two years ago.
A subcontractor invoice policy is, in the end, a professional courtesy dressed up as an administrative tool. It tells your contractors that you run a structured business, that you'll pay them correctly and on time, and that you've thought through the process before they started work. That reputation keeps good freelancers coming back.