When clients agree to cover your project expenses, invoicing them correctly matters. Here's how to structure expense reimbursement on your invoices and what records to keep.
What Are Reimbursable Expenses?
Reimbursable expenses (also called pass-through expenses or disbursements) are costs you incur on a client's behalf while delivering a project, which the client has agreed to pay back.
Common examples:
The key word is "agreed." Reimbursable expenses should be agreed before you incur them, not claimed retroactively.
Setting Up Reimbursable Expenses in Your Contract
Before any work involving significant out-of-pocket costs, include expense terms in your agreement:
"Out-of-pocket expenses incurred in the delivery of this project will be invoiced at cost plus a [0% / 10%] administration fee. Expenses above $[threshold] require prior written approval."
The administration fee (if you charge one) compensates for the time and cash flow cost of advancing expenses on the client's behalf. 5–15% is typical.
The approval threshold protects both parties: you don't surprise the client with large unplanned expenses, and you have clear authority to spend up to the threshold without asking each time.
How to Invoice Reimbursable Expenses
Show expenses clearly and separately from your fees. Using two sections on the invoice (or two separate invoices) is cleaner than mixing them:
Section 1 — Professional fees:
Strategic consulting — 12 hours at $150/hr — $1,800
Section 2 — Reimbursable expenses:
Return flights London–Edinburgh — 12 March 2025 — $286
2 nights hotel — Edinburgh — 12–14 March 2025 — $340
Taxi to client site — $45
Total expenses: $671
Total invoice: $2,471
If you're charging an admin fee: "Expense administration fee (10%): $67.10" as a separate line.
Receipts and Documentation
For every reimbursable expense, keep:
Attach a receipts summary or the receipts themselves to the invoice. Many clients require receipts before they'll approve expense reimbursement. For travel-heavy projects, a simple expense report (date, description, amount, receipt reference) attached to the invoice is professional and clear.
GST/VAT on Reimbursable Expenses
Tax treatment of expense reimbursements varies by country and by whether you're billing expenses at cost or with a markup:
At cost (pure disbursement): In many jurisdictions, reimbursements at exact cost are treated as a pass-through and may not attract GST/VAT.
With markup: If you're adding a percentage, the marked-up total is likely subject to GST/VAT as revenue.
Your input tax credits: If you're GST/VAT registered and you paid GST on travel or supplies, you may be able to claim those back as input tax credits — even if you're reimbursing at cost.
This can get complex. Confirm the correct treatment with your accountant for your specific situation and country.
Mileage Reimbursement
If you drive your personal vehicle for client work, you can typically claim a per-kilometre or per-mile rate rather than actual fuel cost.
Many countries have standard approved mileage rates:
Claim the standard rate, not actual fuel cost — it covers depreciation, wear, and maintenance as well as fuel. Keep a mileage log: date, origin, destination, purpose, distance.
Keeping Clients Informed
For projects with significant expense components, send a brief mid-project expense update so the client isn't surprised by the final invoice amount. A quick email — "just a heads up, travel costs for the Edinburgh trip came to $670, which will appear on this month's invoice" — prevents invoice shock and speeds up approval.
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