Sometimes I see that people get thrown off by the idea of reimbursable expenses or "reimbursables" which is a little less of a mouthful.
So what is a reimbursable and how does it differ from anything else that you buy for your clients?
What is a Reimbursable Expense?
Reimbursables are generally small, incidental expenses that will be repaid after purchase, that are not directly related to an item and that are billed dollar to dollar to the client. This can include things like couriers, postage, mileage, items for install like light bulbs and batteries, blueprint printing, and coffee can be reimbursable expenses.
It's something you buy and want the client to pay you back for without marking up.
Reimbursables can also get a bit pricier, particularly when you travel. Airline tickets, hotel rooms, meals, and Lyft rides can also all be considered reimbursable expenses. This is something that should be in your contract and discussed with clients prior to purchase. An alternative to having travel costs be reimbursable, you may want to negotiate a "per diem" with clients when you travel. This means that you decide on a set per-day fee for your travel budget. Be sure to spell out what is included in the per diem - is it only meals, or does it include car fees & accomodations?
When a cost is associated with an item I don't consider it a reimbursable, despite the fact you may expect to be "reimbursed". Things like shipping costs for a sofa or installation fee for the Picasso.
Billing Reimbursable Expenses
Alright, now stay with me for a minute, because your accountant may feel differently about some of the things I said above. This is because generally how you handle reimbursables in your accounting software is different than if you entered it as a separate invoice or "item" if you use Studio Designer like I do.
Because of this, the way that income, expenses, and costs of good sold is different from reimbursables and may not show on your income reports. For me, reimbursables are few so I don't worry about them much - even if they probably should be entered as an item. Things that your accountant may want you to enter include those light bulbs and batteries. This allows you to have a more accurate report on your profit and loss on every single item. So if you do have a high-volume on these types of expenses, you may want to talk to your accountant on how best to enter them into your accounting software.
So keep in mind, that something can be considered a reimbursable expense, but still be entered in your system as a standard item for recording and compartmentalization purposes. Reimbursables do not include costs of doing business and overhead like rent, utilities, phone, staff, etc. There are no absolute rules in billing for reimbursables. Looking at the examples below, you may already have a bottle of glass cleaner in your toolkit, you're not likely to charge the client for that. And if you buy a new bottle to leave with them, you may enter it as a reimbursable expense for accounting or as a separate item to track income.
Examples of Reimbursable Expenses
- Blueprint printing
- Overseas phone charges
- Courier Services
- Meals during travel
- Internet during travel if working for client (not for Netflix binge)
- Dry Cleaning during travel
- Picture-hanging supplies
- glass cleaner