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How to record client reimbursed expenses?

  • I am a sole proprietor LLC and my business is an IT consulting practice.
  • I use QuickBooks online "Plus"
  • Some of my travel is reimbursed by my clients
  • I also have other "materials" that are reimbursed by my clients
  • When I bill my clients I record these items as "reimbursable" expenses and understand this is "income"
  • My question is - what options do I have for recording the off-setting expenses?  I provide a detailed invoice outside of QB and do not want to provide the line item reimbursable detail from QB.  
  • Can I set up an expense account simply called: Reimbursable Expense?
  • I am specifically asking this because I also travel for conferences etc so have other "travel/meal" related expenses too and I am thinking I need to differentiate between the two. 
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Best answer 10-15-2018

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Established Community Backer ***

You do not have reimbursed expenses, only employees do Yo...

You do not have reimbursed expenses, only employees do

You have expenses, you may or may not invoice the client for them and may or may not mark them up, in any case they  pay the invoice and that is your income

On the P&L your expenses reduce gross income to get net taxable income

Yes you can post what you are calling reimbursable expense to one general expense account account, if you wish.  And the income to another income account.  You do not net income and expense in one account.

11 Comments
Established Community Backer ***

You do not have reimbursed expenses, only employees do Yo...

You do not have reimbursed expenses, only employees do

You have expenses, you may or may not invoice the client for them and may or may not mark them up, in any case they  pay the invoice and that is your income

On the P&L your expenses reduce gross income to get net taxable income

Yes you can post what you are calling reimbursable expense to one general expense account account, if you wish.  And the income to another income account.  You do not net income and expense in one account.

Not applicable

@Rustler - Tips & Tutorials - While technically what you...

@Rustler - Tips & Tutorials - While technically what you say is true, reimbursements may in some cases overstate your income - particularly for Meals.  For eg. if I have $3000 peryear in reimburseable meals, IRS let's me deduct 50% i.e. $1500 but I get $3000 back from the client. So now I have $1500 in additional taxable income when its really not income.
Established Community Backer ***

"When I bill my clients I record these items as "reimburs...

"When I bill my clients I record these items as "reimbursable" expenses and understand this is "income""

The Expense is whatever you Bought and paid for: Meals, Travel, Office Supplies, Postage, etc; Even though you intend to Charge that to the customer = Selling it to them, to be Reimbursed, that doesn't change the Details for what you incurred.

"reimbursements may in some cases overstate your income - particularly for Meals.  For eg. if I have $3000 peryear in reimburseable meals, IRS let's me deduct 50% i.e. $1500 but I get $3000 back from the client. So now I have $1500 in additional taxable income when its really not income."

No. That isn't Overstating anything.

We seem to be confusing Gross and Net.

Gross = what you incur, in full; and what you are Paid by others, in Full.

Net = the difference. If I pay $500 for Stamps for you, and charge that to you, I have $500 Postage Expense and $500 Income to report. I have a Net of 0.

And the tax regulations and provisions have Nothing to do with this tracking. You track it, because you Need it for reporting. You report it, based on what the Tax regulations allow.

So, yes, you incur a $100 meal, and the IRS only allows you to take 50% as Expense, because we all need to eat, so that is not all Business. Meanwhile, you "sell" it to the customer for $100.

Yes, you just made $50 in Taxable Income, in that part of the expense is Not Reportable.

That isn't an overstated condition. That is Reality.



Not applicable

So how do we record those say travel expenses and keep tr...

So how do we record those say travel expenses and keep track of to whom we must bill them?  For example, may I call the Vendor the Customer name and mark all costs as Reimbursable Expenses?  Is there a better way to record and track what I must bill each customer for?
Established Community Backer ***

"So how do we record those say travel expenses" Start wit...

"So how do we record those say travel expenses"

Start with How you Paid for it. s Expense from Checking (or on debit card) or as Credit Card charge.

"and keep track of to whom we must bill them?"

You split the details and assign Customer Name in the detail lines. Example:

Lodging split to 3 different Clients; as billable or not.

"For example, may I call the Vendor the Customer name"

No. That makes no sense. Example:

Postage from USPS is split as "postage reimbursed expense" by using your Service or noninventory product, listing that three times, so that you can allocate how much goes to each Customer name. USPS is your Payee name.

"and mark all costs as Reimbursable Expenses?  Is there a better way to record and track what I must bill each customer for?"

You enter something as Billable, to the customer, because you intend to Bill them for it. The same is true for Billable time, from timesheets.

Go here and testdrive this in a sample file:
Links to Online Sample Companies - Test Drive QuickBooks Online - QuickBooks Learn & Support
Not applicable

Re: "When I bill my clients I record these items as "reimburs...

What if part of your business is incurring expenses for the client. For instance, we get paid to buy things for our customers. We get paid a fee for this, not a markup on the stuff we buy. So we may get paid $1,000 to buy $30,000 of goods for the customer and most of the time we get a deposit that we use the for the buying. Our bank account then looks like us getting paid $20,000 then we spent $30,000 and then we get paid $11,000. But if we mark the $30,000 as an expense, a cost of goods sold expense for instance, then all $31,000 as income, it is going to make our profit margin seem terrible. When in reality we made $1,000 for a service. In this case wouldn't it be best to debit the purchases to an income account and then have an offsetting account right next that gets credited for the "reimbursement"?

Established Community Backer ***

Re: "When I bill my clients I record these items as "reimburs...

Marking up or not marking up doesn't change the reality. What you buy is Expense, or Cost of Goods Sold (for products you bought to sell, such as inventory). What you "get reimbursed" simply is the Sales Price, as revenue or income. Your reporting shows the difference = the Net Income, which is part of taxes. Examples:

 

I buy $100 of Stamps to use for your project, and I charge you $100 for that cost, at Cost. That means I have $100 gross Postage expense and $100 Gross Sales Revenue and I net $0 for Profit, and if that sale item is subject to sales taxes, I was supposed to assess you for that, as well.

 

Reimbursement is a Process, not the Expense Account reason. Reimbursement related to customer activities is Sales, not washing away your expense.

 

Yes, if you get a prepayment, and are a Cash Basis Entity, you just got Income. That is what the IRS considers it when someone gives you Funds.

 

Don't examine Banking. You examine the reasons the funds move. You would not post your purchases as negative income; they are your expenditure. They are not the Income event, but the expense event.

 

Do this Right; not with some imagined offset method. Meet with your own CPA to learn how to manage Gross, see Net, and manage Banking events.

Not applicable

Re: "When I bill my clients I record these items as "reimburs...

To clarify...

 

For example: I provide a service that requires me to dine at a establishment, pay the bill out of pocket and get reimbursed a set amount plus a minimal fee. Say I have lunch at it costs $30... but I will be getting reimbursed for $20 plus a $2 fee. How would I enter this into quickbooks online?

Established Community Backer ***

Re: "When I bill my clients I record these items as "reimburs...

Using the word "reimbursed" is what people get wrong. You incur something and you Charge something. That isn't Reimbursed. That is Sales.

 

Example: I buy a Large envelope for mailing your stuff to you, along with some binders and other presentation materials. That is my Office Supplies expense. I charge it to you at cost or not, does not matter. The amount you pay me is my Sales revenue. If sales of material goods is subject to sales taxes, then you also see that I added the sales tax amount to the total you owe me.

 

Food is a different issue; all humans need to eat. "Food" you eat is not 100% business expense and the rules changed with the Dec 2017 tax regulation updates. No one on the QB peer user forum can give anyone the specific tax regulation guidance for what applies to your business; you need to meet with your own CPA to review which of your operations is treated in which manner, per those tax regulations.

Not applicable

Re: "When I bill my clients I record these items as "reimburs...

I am no expert, but I think the original question is how to avoid overstating the Meals and Entertainment expense, which is normally deductible at 50%. The IRS allows full deduction of customer-reimbursed Meals and Entertainment (assuming they're reasonable and customary business expenses) since these pass-through and net to zero. 

 

For example, a business with $1000 in service sales, $100 in billable Meal expenses, and $100 in other non-billable expenses, bills its client for $1,100.  Its sales should be $1,000, the Meal expense should zero out, and taxable income should be $900 ($1,000 - $100.)  If you treat Meals as any other expense, sales would be $1,100, DEDUCTIBLE expenses would be $150 (50% of the Meals plus $100 other expenses), and taxable income would be $950. 

 

Am I missing something here?

Community Contributor **

Re: How to record client reimbursed expenses?

If you record as travel expense at the time it is incurred and later received as reimbursement, you can record it as income.  yes, you can create a category called reimbursement income and record under that head

Suba k

SMD Financial Group LLC

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