Billable Expenses: How to Pass Through Costs to Your Clients

What are billable expenses?

A billable expense is any cost you incur on behalf of a client that you intend to pass through to them — meaning they reimburse you for it, usually as a line item on your next invoice. The expense is yours initially (you paid for it), but the client is the ultimate payer.

Common examples for freelancers:

• Software and licenses— stock photos, fonts, SaaS tools, hosting fees purchased specifically for a client project.
• Travel costs— train tickets, flights, hotel stays, mileage for on-site meetings or events.
• Materials and supplies— printing costs, prototyping materials, USB drives, or any physical goods needed for the deliverable.
• Subcontractor fees— if you hire a photographer, translator, or specialist for part of the project, their fee can be passed through.
• Shipping and postage— courier fees for sending physical deliverables, samples, or equipment.

The key distinction: a billable expense is something you would not have purchased if not for this specific client's project. Your general office rent, your laptop, your internet bill — those are your operating costs, not billable expenses.

How to mark an expense as billable

The moment you pay for something on a client's behalf, log it in your expense tracker. Here's the workflow:

1. Open the Expense Tracker and click Add Expense.
2. Enter the details: description, amount, date, and category (e.g., Travel, Software, Materials).
3. Toggle the Billable switch to on.
4. Select the client this expense belongs to. This links the expense to the right project so you can find it later when creating the invoice.
5. Optionally attach a receipt (photo or PDF). This is not just good practice — some clients require receipts before reimbursing expenses.
6. Save. The expense now appears in your billable expenses list, ready to be converted to an invoice line item.

Log expenses immediately — don't wait until invoice day. Receipts get lost, amounts get fuzzy, and small expenses slip through the cracks.

Converting billable expenses to an invoice

When it's time to invoice the client, you want those billable expenses to appear as line items alongside your service fees. In Bontello:

1. Create a new invoice for the client (or open an existing draft).
2. Click Add Billable Expenses. Bontello shows all unbilled expenses for that client.
3. Select the expenses you want to include. Each one becomes a line item on the invoice.
4. Review the line items. You can adjust descriptions for clarity (e.g., change “Shutterstock — 5 images” to “Stock photography for website redesign”).
5. Send the invoice. The expenses are now marked as billed and won't appear in your unbilled list again.

This keeps your dashboard accurate: unbilled expenses show money you're owed, and billed expenses are linked to the invoice they appeared on.

Handling VAT on pass-through expenses

VAT on billable expenses trips up many freelancers. The rules depend on how you structure the reimbursement:

Option 1: You invoice the expense as your own supply (most common)

If you include the expense as a line item on your invoice, it becomes part of your taxable supply. You charge VAT on it at your standard rate, just like your service fees. This is the default approach and the simplest from a bookkeeping perspective.

Option 2: Disbursement (agent acting on behalf of client)

In some EU countries, if you purchased the item strictly as an agent for the client (the receipt is in the client's name, the goods go directly to the client), you can pass it through without adding VAT. This is called a disbursement. It's less common for freelancers and has stricter rules — consult your accountant before using this approach.

For most freelancers, Option 1 is the correct and safest approach. When in doubt, check with your local tax authority or use Bontello's VAT Calculator to verify the amounts.

Best practices for billable expenses

• Agree upfront. Define which expenses are billable in your contract or quote. Surprises on invoices erode trust. A simple clause like “Travel expenses, software licenses, and subcontractor fees will be billed at cost” sets expectations.
• Set a cap or require approval.For open-ended projects, agree on a maximum expense amount (e.g., “Expenses up to €500 per month; amounts above require prior written approval”).
• Keep receipts for everything.Digital or physical, always save the receipt. Some clients require receipts before processing reimbursement. Even if they don't, your tax authority might.
• Bill promptly.Don't let billable expenses pile up for months. Include them on the next invoice cycle. The longer you wait, the harder it is to get reimbursed.
• Separate expenses from service fees.On the invoice, list your service fee as one section and expenses as another. This transparency makes it easy for the client to understand what they're paying for.

Key takeaways

• Billable expenses are costs you incur on behalf of a client that they reimburse via your invoice.
• Log expenses immediately with the billable toggle and link them to the correct client.
• Convert unbilled expenses to invoice line items when you create the next invoice.
• In most cases, charge VAT on pass-through expenses at your standard rate and reclaim input VAT on your return.
• Agree on billable expense terms upfront in your quote or contract — never surprise clients.
• Keep receipts for every expense. Your tax authority and your clients will both appreciate it.