Whatever your job, it is common practice to purchase things on behalf of others and then pass those costs on later in an invoice, with or without markup. QuickBooks has a well-integrated method for making this process take no time at all and for ensuring that you don’t forget to invoice your clients for anything they should be paying for.
⇛ billable expenses in QuickBooks Online
A billable expense is an expense you incur on your customer’s behalf when you perform a work for them. You can easily record and track billable expenses so your customer can reimburse them when they receive their invoice.
Whether you enter your expense into QuickBooks as a bill, check, or expense, you can mark it as billable. This means you will both enter the name of the customer that the expense will be paid for by, as well as check off the billable box. If you want to markup the cost you can enter the applicable percentage. When you save your transaction the expense gets recorded as usual, and a non-posting transaction is also recorded called a billable expense.
You can watch our YouTube video on this process here.
⇛ Create Billable Expenses
Above is a sample expense screen for some lights purchased from Dan’s Lighting that was for a project related to customer Diego Rodriquez. If you don’t see the billable, customer, and markup fields on your screen you may have to activate them first or upgrade to a higher level of QuickBooks Online.
⇛ Step 1 – Set Up
Make sure you are using QBO Plus or a higher version. To activate these options click the Gear icon in the upper right of QBO, then Account and Settings. Under the Expenses tab make sure the following two features are turned on: “track expenses and items by customer” and “make expenses and items billable.” Also, tick the box for “markup with a default rate of X%.” You can leave the default percent as 0.
⇛ Step 2 – Categorize the Expense
Then within the expense or bill screen, tick the box for billable and enter the customer name that pertains to the charge. You can also indicate a percent mark up if applicable. The description entered on the expense will flow through to the invoice, but can be edited later.
⇛ Step 3 – Send the Invoice
Next, within the invoicing module of QuickBooks as you go to create an invoice for Diego Rodriguez you will be reminded about your unbilled, billable expenses. Depending on the version of QuickBooks that you are using the reminder might be in the form of a pop-up or the expenses might just show off to the right side in a “drawer,” but either way QuickBooks is keeping track of the expenses you marked billable, but have yet to bill out to clients.
All you have to do is add the billable expense to your invoice. Whatever description you wrote on the expense will show on the invoice. If you have a markup, that will show as a separate line item, but not when sent to the customer or printed.
The other nice feature of billable expenses is that these items can post to a different income account called Billable Expense Income on the P&L which makes your reporting more informative.
⇛ Create Reoccurring Expenses
In the case of the IT Professional or anyone who sells the same thing at the same price to their client, there is even a faster way to do this.
Set up an item or product/service for the expense. Then every time you purchase the same item you can just type the name of the item and all associated information will pre-populate. If the purchase reoccurs on the same day each month you can even save it as a reoccurring or memorized transaction so it automatically posts. The memorized transaction will hold all the necessary information including expense account, amount, description, mark-up percentage, transaction amount, and the client responsible for the charge.
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