Claiming mileage from a client

I consult and mainly use the billable hours module. A company that I subcontract to reimburses me for mileage and I need this to reflect on my monthly invoice to them. Can anyone enlighten me please?

Thanks in advance

Mileage is an inferred expense, meaning that no money actually changes hands. But it is billable and usually tax-deductible to the extent that it is not reimbursed by the client. When you drive your personal vehicle, it is as though you donated the cost of the mileage from your personal funds. So you use the Expense Claims module. Here’s how to do it:

  1. If you do not have a capital account in your name, go to settings and select Expense Claims Payers. Create yourself as a payer. (If you have a capital account already because of your business organization, you can skip this, because capital account owners automatically are included as expense claims payers.) Of course, you must have the Expense Claims tab enabled.

  2. In the Expense Claims tab, create a new claim. Choose yourself as the Payer. Leave the Payee blank. Enter the monetary amount of the mileage at the agreed reimbursement rate. I personally like to put the details of the mileage in the description, but what you put there is up to you. You have two choices about how to handle the rest of the process: (1) Allocate the claim to Billable Expenses and the customer’s subaccount. (Billable Expenses module must be enabled, too, and the customer must have already been created.) When its time to issue a sales invoice, treat the mileage as you would any actual billable expense and bill it to the client; (2) Allocate to Motor Vehicle Expenses, or whatever you call such an account. To invoice the client, simply add a line for the mileage to the sales invoice.

  3. Periodically, clear the expense claims by (a) journal entry, transferring them to an equity account (again, depending on your organizational type) or (b) reimbursing yourself from a cash or bank account, debiting Expense Claims. Note that until you clear them, expense claims show as a liability of the company, even though that liability may be to you.

With the first approach described in #2 above, the mileage claim never hits your Motor Vehicle Expenses account, leaving that account for vehicle expenses that are related only to company business and are not reimbursed by the client. There will be no net effect on your profit/loss, because the expense is passed straight through to the customer and will not be recorded in a revenue account. The customer payment, in effect, satisfies the liability.

With the second approach in #2, your Motor Vehicle Expenses account will show all mileage. The reimbursement will show in a revenue account, but will be offset by the expense. Thus, again, there will be no net effect on profit/loss.

The key is to understand the concept of the inferred expense. You use the same approach for incidental mileage you do not bill to a client. Likewise, if you have travel expenses for which a per diem rate is agreed, record that via an expense claim, because it is a billable and tax-deductible amount, but no money changes hands.

Thank you :blush:

Firstly, excellent software - you’ve made my new employment venture so much less painful. Thanks.

I searched for this topic because after recording my mileage as ‘spends’ against a cash account up until now my bank account doesn’t balance because no money is physically changing hands.

I’m struggling with the inferred expense concept. I’m in the same boat as Sally. I have some mileage which is not billable and some which is. I am a limited company one-man contractor. I understand 1 & 2 above but struggle with 3. Could you possibly expand on #3 and the need to periodically ‘clear’ the account?

First, be sure to read this Guide, which was written much more recently than my August 2015 response above. It is more thorough and includes examples. The so-called inferred expense is the second type discussed in the Guide.

Second, expense claims need to be cleared from the Expense claims liability account only if the person incurring the expense (in this case via mileage on a car) is not a capital account owner or employee. As explained in the Guide, in those cases, the expense is automatically transferred to a capital account or the Employee clearing account, respectively.

If you have set yourself up as an expense claims payer, the claim will appear in Expense claims and remain as a liability of the company until you clear it. The reason it is a liability is that you have invested money, paying a real expense of the business, by driving your personal vehicle. Your tax law will allow you to deduct that expense, even though no company funds were actually paid out of the business bank account. (That’s why your bank account won’t balance.)

So you transfer the liability to an equity account. The exact equity account depends on how your chart of accounts is set up. Basically, you debit Expense claims and credit the equity account.

Thanks for the reply. I’m clearer now but I’m not sure which guide you are referring to. The hyperlink (if it exists) doesn’t work for me. Can you confirm the title?

I’m sorry! I forgot to paste in the hyperlink. Here it is: Use expense claims | Manager. It is also available from within the application under the Learn How To list while in the Expense Claims tab. It’s the first one on the list.

Excellent. Pretty sure I’ve got it dialled.

I deleted all of the mileage ‘spends’ against the business cash account & instead set myself up as an expense payer and expensed all of the mileage as allowances allocated as billable expenses to the client. I then allocated a ‘spend’ from the business account to myself as an employee and refunded myself the mileage allowance. My bank account now balances.

It was the concept of me having provided a service (my car + associated costs) to the business which required re-payment which I struggled with given no money was changing hands but your guide and explanation made things clear.

Many thanks!

If you had yourself set up as an employee, you did not need to create yourself as an expense claims payer. All employees are automatically set up as expense claims payers and listed under that heading in the expense claims Payer dropdown list. If the situation is as you described, your name now appears unnecessarily in two places.

Damn…so close :smile: I hadn’t set myself up as an employee yet. There had been no need as I have not drawn any salary from the business.

I have now however set myself as an employee, flipped all of the expenses from me as an expense payer to me as an employee and deleted my Expense Payer entry.

Thanks again.

I didn’t mean to imply you should set yourself up as an employee. I only mentioned that because you wrote about spending to reimburse yourself as an employee.

I don’t know the law in your jurisdiction, but in some, it is actually illegal for a sole owner to be treated as an employee. You’ll have to check local law on that. Normally, reimbursements and “salary” for sole owners are both handled as payments from owner’s equity or drawings against a capital account.