Reimbursable expense - What is a reimbursable expense?
A reimbursable expense is an expense that a business incurs on behalf of the customer while conducting their business. These expenses may include travel, delivery fees, currency conversion fees, office expenses, and business phone calls.
Looking for a quick way to record and keep track of your business expenses? Check out our blog on recording your expenses with OCR technology.
Reimbursable expenses are costs related to carrying out a project for a customer that will be reimbursed at a later date. It is important to discuss with your customer which expenses are reimbursable and which are not.
This term may also refer to employees of a company incurring costs related to their job, in which the company will reimburse them for at a later time. For example, a business lunch with a potential client.
How do I record reimbursable expenses on my invoice?
If your business has reimbursable expenses, you’re probably wondering how to reflect them on the invoice you send to your customer. If you use invoicing software, it will be quick and easy to record this cost. I will provide an example using Debitoor invoicing software.
You will need to record the transaction as both an expense and income, which will essentially cancel each other out.
In this example, we will say that a consulting firm incurred travel costs in which the customer will reimburse them.
First, record the expense once you have paid for the product/service:
Once the expense has been created, this will reflect in your accounting reports as a cost to your business.
Next, you will need to invoice the client:
As you can see, you will add the reimbursable expense as an extra invoice line, along with the money they owe you for the product or service you provided. Once the invoice is paid, the income will cancel out the costs related to the expense. If you prefer, you can provide a separate invoice solely for the expense.
These items should be shown on the invoice:
- The reimbursable expense as its own invoice line
- The VAT amount charged on the expense
- The total cost of the invoice excluding and including VAT
Once recorded, you will see these transactions reflected on your profit & loss statement.