Is It an Item or a Reimbursable Expense? How to decide when to use the Reimbursable feature in Studio Designer

There are always little expenses that designers question how to bill their clients for, such as amounts paid by designers at installation, Ubers, parking and tolls, meals while meeting with clients, etc. Expense tracking for interior design and knowing when and when not to use the reimbursable expense feature in Studio Designer can help keep your project profit identifiable and help you avoid extra steps and missed billings.

Business owners and employees often get confused about what counts as an item versus a reimbursable expense. This guide will help clear up the confusion by explaining the differences, how to handle each correctly, and our preferred solution for the inevitable de minimis expenses.

Items vs. Reimbursable Expenses

What are Items?

Items are goods and services bought for a specific client. They may be furniture items and all related costs, services such as painting and repairs, or may even be things like drafting, professional fees, or (sometimes) travel expenses.

It’s not about whether you’ll mark it up, make a commission on it, or who paid the original amount. It’s more about the fact that it’s not a cost you would split between multiple clients.

What are Reimbursable Expenses?

Reimbursable expenses are costs for services that are split between multiple clients and sometimes small de minimis amounts. They're usually for travel, meals, or other incidental costs related to work.

• Typical reimbursable scenarios:

  • Local transportation

  • Entertaining clients or hosting meals

  • Printing & Postage

    
    

These expenses are usually indirect costs—things that wouldn’t happen if you weren’t working with a client but aren’t necessarily direct project expenses.

Things to consider:

It doesn’t take any longer to enter an expense as an item than it does to enter it through Money Out as a Reimbursable Expense.

Expenses posted through the Reimbursable option in Money Out have no direct link to the billing for that expense through the Time Billing/Activities module. This opens up opportunities for mistakes and malice.

Although you can markup reimbursable expenses, there’s no way to only tax the mark up, which should be considered if the original expense was taxed or subject to tax.

You thinking of something as a “Reimbursable Expense” doesn’t necessarily mean it should be billed through the Reimbursable Expense feature.

Common Misconceptions:

Because I’m not marking it up, it’s “reimbursable”

All travel expenses are “reimbursable expenses”

My employee paid for it, so it’s “reimbursable”

Drafting is “reimbursable”

Common Expenses that are frequently billed using the Reimbursable option:

Local Transportation - Monthly bills received from driving services that group all trips on one bill, usually one for each month.

Printing - Monthly bills received from printers that may combine both internal printing as well as client printing.

Delivery Services - This would only be for non-item type deliveries, such as documents where the service bills you for multiple clients on one bill and all charges are small amounts.

Postage - Do you keep a postage log? If not, you should. It’s easy enough to bill this monthly when you’re billing the rest of your reimbursable expenses.

Best Practices for Proper Expense Classification

Limit the use of the Reimbursable feature in Studio to expenses that are billed for multiple clients at once. This is an area where designers lose much more than they realize, and once the door is opened, it’s frequently taken advantage of.

NEVER bill freight, crating, storage, delivery, etc. using the Reimbursable function. These are all directly attributable to items, should be marked up, and, in nearly all states, are usually subject to sales tax.

Expert Insights and Recommendations

I recommend creating one item per month for “Reimbursable Expenses”. Create an order for it, and as you post your expense payments to Studio, post them to this one item. You don’t need to enter a purchase cost right away—just let it accumulate throughout the month.

As you are posting your credit card charges, petty cash, and out of pocket amounts, you will be building a record of them in one place. If you edit the descriptions while posting, you can copy and paste them into the client description before invoicing (if you want to show the details, but most designers don’t list each individual amount anyway).

At the end of the month, use the total accumulated in the Payment field as the unit price, mark up if you like (remember that you may need to tax the markup), send the invoice, and create an item for the next month.

Below is a simple example, note that only the Payment on the vendor side has an amount:

Payments can be viewed from within the item using the View Payments button, or from within the Order by selecting View Vendor Payments. Be sure to use the actual vendor when posting the charges, don’t use the default vendor of “Various”:

The unit price has been entered and an invoice has been created:

In the example below, I used a Transactions report to export the vendor payments, copy the descriptions, and paste them into the client description field so they would show on the invoice.

We can help you create this simple report.

Conclusion

Although you can use the Reimbursable area for creating time billing/activity entries to bill your clients, it takes no more time or clicks to create Items to bill these expenses and you’ll have more detail and better project tracking if you use Items.

By far, the greatest benefit of using Studio Designer (in my opinion and experience) is the job costing aspect. It lets you clearly see if you’ve passed all costs to your clients and reduces the potential for lost income through both neglect and purposeful deviance—but for any software to perform to its potential, you must use it correctly.