Making mistakes is a part of life, but when you’re running a business, it can turn into a costly issue. If you’re not taking steps to minimize mistakes, then you’re going to quickly run your business into the ground.
One mistake businesses (particularly freelancers and small businesses) frequently make is not charging clients for certain expenses.
There are times when you have to pay out of your own pocket to get the job done. For instance, when you have to travel in order to complete a project.
This expense incurs due to the client’s project so it’s only right to charge them for the expense. But this is only one example of the types of expenses you may incur on behalf of your customers.
If you find your business is operating at a loss, then this means you’re spending more than you’re earning. Your client-related expenses are one area you want to check.
But whether you’re looking to boost your income to increase your bottom line or to get out of debt, you’ll find this guide helpful.
Let’s review some of the invoicing expenses every business should charge clients for.
1. Time Spent Consulting
When you consult with your clients, you’re giving up precious time that can go towards operating your business and gaining a profit. But the consultation is where you show off your expertise and possibly earn yourself a new client.
So a lot of businesses, especially smaller ones, feel the need to offer consultations for free. Now, this is alright to do for the initial consultation to help drive more traffic to your company.
However, you don’t want to make every phone call and virtual conversation free. Anytime you’re spending hours consulting a customer, it should be billed.
There are several ways you can do so. For example, if you sell services as a package deal, you can include a certain number of consulting hours within the package.
Then every 30 to 60 minutes over that amount is billed at X amount.
Or you can flat out charge customers for consultation phone calls where you answer questions and give out advice.
You’ll spend a lot of time consulting with new customers, squaring away a plan of action for them. And while this is fine, you also need to realize that your time is valuable.
There needs to be clear boundaries so your clients aren’t calling you constantly, taking you away from doing paid tasks.
Be sure to notify clients in advance that you charge a consulting fee and at what rate.
Obviously, there are exceptions to this. You wouldn’t want to bill a client for a five-minute conversation you had over the phone, or a quick coffee meeting where you briefly discuss business. Strike a healthy balance between charging for your expertise and the time you spend building relationships with your clients.
2. Expenses for Travel
As we mentioned earlier, there are times when you have to travel in order to provide a service to a customer. For example, if you’re a photographer and you’re hired to capture photos of a model across the state, then you have to travel.
You may also have to travel to meet with the client and their partners throughout a project.
But whatever the reasons for the travel – if it’s directly related to a particular client, then that client should be billed appropriately.
Now, the expenses that should be included aren’t just for your plane tickets. But also for your hotel room, dining, and transportation (i.e. rental car or taxi rides).
It’s important to tell clients ahead of time about your intent to charge them for travel expenses incurred. This way, they’re not surprised when they receive the bill.
Once they ask that you travel, inquire about them covering the expenses. This can be in the form of reimbursement so you can get an accurate quote before sending your invoice.
In some cases, you may request the initial expenses upfront, such as for the hotel and airline tickets. Then send an invoice for the additional fees that incur throughout the trip.
But it’s whatever works for you and your clients.
3. Time Spent Researching
Your time as a professional is precious and billable.
If you’re required to do research for a client’s project, then this should be billed. For example, if you’re a marketer and advertiser, then you have to research the client’s business and its customers.
This can take quite some time to complete – in some cases days or even weeks. Research may consist of talking to employees, business partners, and customers.
Or it can be pouring over a client’s business documents or data from outside resources.
It all counts as billable hours and should be treated as such. You can use a time-tracking app to manage the time you spend on research.
One platform you can use is invoicely, which you can use to track hours spent on specific tasks. These tasks can then be itemized into your invoice and emailed to your clients.
4. Expenses for Supplies
Depending on the services you offer, you may use a variety of supplies to complete tasks for your customers. For example, you may need to print and copy documents, which takes up paper and ink.
It’s essential to keep track of all the items you use for the project so you can properly bill them for it. Now, if you end up buying supplies that you can use for other projects for other clients, then you should either not bill them for it or only bill them for the portion used for that particular customer.
You can even include fees for subscription services you subscribe to in order to complete a project. For example, a subscription for a research database or a platform to make completing the project easier.
5. Costs for Shipping
If you’re a company that sells physical products, then shipping fees will become an issue. Either you’re going to cover the costs or you’re going to charge your customers for it.
Or maybe you offer a service and need to ship items occasionally. Either way, you need to go over the expenses to determine who should cover it.
If it’s a one-time mailing that only requires an envelope and a stamp, then it’s probably something you can handle. But if it’s frequent mailings to the same customer, then this is a charge you want to include in your invoice.
The shipping cost should include the envelope, packing materials, and box, as well as the fee you pay to the shipping company.
6. Fees Associated with Payments
When a customer pays you, do you have to fork over some of the income for fees? If so, then you may want to charge them for that.
For example, online payment platforms like PayPal charge a 2.9% for every sale you make. This can quickly grow into a large expense if you invoice frequently and for large sums of money.
If you cash checks without a bank account, then you’re charged for that as well.
Even credit card and debit card transactions come tied to fees.
However, you don’t want this to deter you from using these convenient forms of payment. This will make it easier for your clients to pay, which means more on-time payments.
Just include the fees in your invoice, but not before letting them know up front about the charge.
7. Late Payments
Late payments is a real issue for businesses across the world. Wasting time tracking down unpaid invoices and trying to connect with clients for payment isn’t something any entrepreneur should deal with.
This interrupts your cash flow and takes away from productivity since you have to play bill collector.
So to make up for this (or even deter it) is to charge a late payment fee. Again, let clients know ahead of time that you intend to charge a fee for late payments.
Also, state when the late fee goes into effect – for example, is it immediately at midnight or 48 to 72 hours after the due date?
Make sure the terms are clear in your contract, as well as your invoice.
8. Other Related Expenses
It’s hard to list every single expense you may come across when providing products and services for customers. But if there are expenses directly related to your project or client, then it’s something you should consider charging.
For example, maybe you have to buy a specific type of equipment to complete their project (and that isn’t likely to be used for future clients), then you need to charge them for this.
Whatever expenses you incur while on the road or in the office should be considered a project-related expense. Just use your better judgment to determine if it’s worth charging for.
You don’t want to nickel and dime your clients, especially if it’s for something small. If the expense isn’t going to hurt your bottom line, then it may be alright to overlook it.
Also, don’t forget to save all of your receipts to prove your expenses.
Being Professional About Charging Clients for Expenses
Your relationships with customers are just as important as getting paid. If they don’t like doing business with your company then you’re going to have to constantly look for new clients.
Loyal customers can save your business money that would otherwise go to marketing and lead acquisition expenses.
By being professional and outlining the expenses you charge for and including an itemized list in your invoice, you can instill trust and ensure you’re paid fairly.
Do you currently charge clients for expenses? Let us know in the comments which expenses you charge for (or plan to charge for)!