Tracking Disbursement Expenses to a Customer

Disbursement Expenses are costs incurred on behalf a customer, which are then claimed back from the customer. For example, an architectural business may pay engineering costs for a design site and then claim the cost back from the customer.

To ensure disbursement expenses (or billable expenses) are passed on to a customer, it is recommended that you assign expenses directly to the contact in Xero. The following steps outline how to do this, to avoid the risk of disbursements not being passed on to the client:

1. Create a Purchase Invoice for the disbursement expense that you are paying for. Allocate the expense to the Disbursements Expense account. You may have to set up a new Account in Xero, if one does not currently exist.
2. Add the Contact on the Purchase Invoice as the Customer that the disbursement relates to. This will need to be an existing or previously created customer. You can not assign an expense to a new customer from this screen.
3. Assign the expense to a customer.
4. Approve the bill. Apply the payment you make from your bank account to the invoice when it appears in Xero.
5. When invoicing the customer for services undertaken, assign the billable expenses to the invoice. When a contact is added to a new Sales Invoice, Xero will show all the expenses you have assigned to customer. Select the expenses to be billed to the client.
6. The invoice will now reflect all the disbursement expenses you wish to claim from the client.

Utilising this Xero feature will allow you to track the expenses you pay for on behalf of a customer, and ensure you have the option to include them in your final invoice to them.