A lot of service professionals spend a lot of time and energy passing on expenses to their customers. Maybe you’re an interior designer and you buy furniture for your clients, then pass on a marked-up cost. Maybe you’re a painter and you buy the paint for your client. Maybe you’re an IT professional and you pay for various subscriptions for your clients. 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.
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 checking 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.
Above is a sample expense screen for some lights purchased from Dan’s Lighting that was for a project you were doing for 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.
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.
Then 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.
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.