Reimbursable expenses are costs you pay on behalf of a client that you’ll bill back to them later. Think materials for a project, travel for a consulting engagement, or software purchased for a client’s setup. If you don’t track them separately from your regular business expenses, your profit and loss statement will overstate your costs and understate your real margins.

In QuickBooks Online, the simplest method is using the billable expense feature. When you record an expense, check the “billable” box and assign it to the relevant customer. That expense sits in a queue until you create an invoice for that client. When you add it to the invoice, QuickBooks offsets the original expense with the reimbursement income, keeping your financials clean.

If you skip the billable tracking and just record the expense normally, two things go wrong. First, your expenses look higher than they really are because they include costs that aren’t truly yours. Second, when the client pays you back, that reimbursement shows up as revenue, inflating your top line. Your P&L tells a misleading story in both directions.

Some businesses prefer to record reimbursable expenses to a balance sheet account like “Reimbursable Expenses Receivable” instead of running them through the P&L at all. This treats the expense like a temporary loan to the client. When the client reimburses you, the receivable clears out. This method keeps your income statement completely free of pass-through costs, which gives you an honest picture of actual business performance. Either approach works as long as you’re consistent. The billable expense method is easier to manage in QuickBooks Online and works well for most small businesses. The balance sheet approach is cleaner when you have high volumes of pass-through costs.

A few practical tips. Don’t wait to invoice reimbursable expenses. The longer you sit on them, the harder they are to collect and the easier they are to forget entirely. Bill them monthly or as soon as the project wraps up. Keep receipts and documentation for every reimbursable purchase because clients sometimes push back, and you need proof. Also decide upfront whether you’re passing expenses through at cost or adding a markup. If you mark up reimbursable expenses, the markup portion is your actual revenue. QuickBooks lets you set a default markup percentage so it applies automatically when you add billable items to an invoice.

Good invoicing habits and accurate expense tracking go hand in hand here. When one side breaks down, reimbursable costs get lost in your books and you end up absorbing expenses that should have been billed to someone else.

If your books already have reimbursable expenses mixed in with regular operating costs, untangling them takes some effort but it’s worth it. A QuickBooks ProAdvisor in Long Beach who understands your business model can help separate what’s truly yours from what should have been billed back, and set up a system so it stays clean going forward.