QuickBooks Online offers a powerful tool known as “billable expenses” to help businesses accurately track, invoice, and get reimbursed for expenses incurred on behalf of clients or customers. You can mark expenses as billable so that you can pass the costs on to your clients.
In this article, we’ll explain billable expenses in QuickBooks Online, provide detailed examples, and explain how to set up and use this feature effectively.
Understanding Billable Expenses in QuickBooks Online
Billable expenses in QuickBooks Online are costs or expenditures that a business incurs while providing goods or services to a customer. These expenses are directly associated with a specific client or project and can be billed back to the customer as part of the total invoice.
Common Billable Expenses
Billable expenses can encompass a wide range of costs, including:
- Travel expenses: Such as airfare, hotel accommodations, and meals incurred while traveling for a project
- Mileage: If employees use their personal vehicles for work-related travel, the mileage can be billed
- Materials and supplies: Any materials or supplies purchased specifically for a project can be classified as billable expenses
- Subcontractor costs: Payments made to subcontractors or other vendors working on a project can be passed on to the client.
- Printing and shipping costs: Charges for printing marketing materials or shipping products can also be billable.
Custom Billable Expenses
QuickBooks Online allows for the customization of billable expenses. You can create your own expense categories tailored to your business needs. This flexibility enables you to accurately categorize and bill a wide variety of costs specific to your operations.
How to Set Up Billable Expenses in QuickBooks Online
Enabling Billable Expenses
Before you can start tracking and invoicing billable expenses in QuickBooks Online, you need to enable this feature. To do this, go to the Settings menu and select Account and Settings. Then choose “Expenses” from the left menu. In the “Bills and expenses” section, turn on “Make expenses and items billable.”
Enabling billable expense tracking in QuickBooks Online
Creating Expense Categories
To accurately categorize your billable expenses, it’s essential to create custom expense categories. Click on the Transactions tab, and then select Chart of Accounts. Click the New button and select Expenses. Enter the name and description for the new expense category, then choose the income account where the billed expenses will be recorded. Complete the screen, and once done, click Save.
Creating new expense accounts in QuickBooks Online
Assigning Expenses to Customers or Projects
After enabling the billable expense feature and setting up custom expense categories, you can start assigning expenses to customers or projects. Create or open an expense transaction (e.g., bill, check, or credit card expense). In the expense form, click the checkbox in the Billable field.
Marking expenses as billable in QuickBooks Online
QuickBooks Online offers various reports to help you track billable expenses, such as the “Billable Expenses by Customer Detail” report. This report provides a comprehensive view of all expenses assigned to each customer or project.
Billable expenses also enable you to assess the profitability of individual customers or projects. By comparing total billable expenses with the revenue generated from each project, you can make informed decisions about which clients or projects are most lucrative.
Billable expenses can impact your tax deductions. By accurately tracking and categorizing these expenses, you ensure that you claim the appropriate deductions, which can lead to significant savings during tax season.
Billable expenses in QuickBooks Online provide a powerful tool for businesses to efficiently track and bill expenses to clients and projects. By understanding how to enable, set up, and utilize billable expenses effectively, you can streamline your financial operations and maximize your profitability.