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7 unknowns behind billable expense income for freelancers

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Updated on:
December 11, 2022
December 11, 2022
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Track your time effectively and create professional invoices with Bonsai.
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The concept of freelance work sounds great. Decide your own hours, submit proposal templates to jobs that appeal to you, manage your own contract templates, take long vacations, and set your own rates. It’s no surprise so many people have joined the remote work revolution in the past few years. However, many of them are being misled.

Sure, there is money to be made, but most freelancers aren’t making nearly enough as they should be. A lot of freelance workers make the mistake of underselling themselves, effectively missing out on a lot of billable expense income that they could have been paid for.

This reality has led some to advise freelancers to aim for as much as $100 per hour to compensate for everything they need to do. It’s time you learned just what you’re missing out on.

What is billable expense income in freelancing?

So, before diving into the nitty-gritty, let’s answer the most obvious question - what is billable expense income?

Billable expenses are the costs that you incur while carrying out work for your clients. You can add these items to your freelance invoice as additional expenses, which are different from the products or services you provide.

Imagine you have your own creative agency, and you begin a new project with a client. Every month, the agreed deliverables are:

  • 4 x long-form blogs
  • 4 x original graphics per blog
  • 1 x high-value keyword per blog

You may have agreed on a fee for each blog, or a per-word rate, as many freelance writers do. But what about all the time you spend researching? What about the lengthy Skype calls discussing project specs? What about the time required to do keyword research? How about the emails?

Even in some of the highest paid freelance jobs, many new freelancers are losing out because they don’t think to charge for these items.

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3 reasons to include billable expense income

Including billable expense income on your invoices is a smart move for more reasons than one. It isn’t just about getting paid for the time you spend on Google. Here are three big reasons that freelancers should consider charging for these added costs.

1. You can compare clients by profitability

That great client that pays you $40 per hour may be your favorite to write for, but when you factor in the 7-8 hours of unpaid scoping time each week, suddenly the hourly rate doesn’t look so good.

Before you broach the subject with your client, it’s always a smart move to have the facts. Gut feelings can easily be debated, but cold, hard data that proves the time you are investing will carry much more weight with your clients. By using Bonsai to improve your time tracking and management, the conversation will go a lot smoother.

2. Get a clearer picture for tax season

Research from the Freelancers Union found that almost one-third of American citizens are classed as freelancers. With that in mind, there is a pressing for more people to get proactive with their tax management and familiar with the best tax software for independent contractors.

If you don’t have a clear understanding of your earnings, and what you are charging for, then it’s very easy to underestimate the figures on your self-employment tax forms. The move to a more vigilant, itemized billing system with all your clients can benefit you on payday, and during the end-of-year tax rush.

3. Protect yourself from unfair clients

It would be great if all clients were fair and decent, but sadly, many freelancers learn a few tough lessons along the way. There are no hard rules for what you can or can’t charge a client for so it’s up to you to communicate everything. With professional proposals and a written freelance contract, you can set reasonable freelance rates that reflect the demands of the project.

Do you want a system that ensures you get paid what you’re owed? Sign-up for a free Bonsai trial to take control of your freelance career today.


4 types of billable expense income you should charge for

The founder of Freelance to Win, Danny Margulies, has enjoyed great success in helping new freelancers earn their worth. He believes that many fall into a trap of using their previous job as a guide for their freelance rate.

“When people move to freelancing from a corporate job, they often use their salary as a benchmark: ‘I was making $X an hour, so that’s what I should charge,’”

Here’s the truth:

Every single second that you invest in contributing towards a client’s project or a process that will benefit them or their business is a second that you should be charging for. It doesn’t matter how insignificant it may seem – that’s time out of your life going towards the betterment of your client.

As a professional freelancer, you should strive to get paid for your work and bill your clients appropriately. Here are four items that your clients may pay for.

1. Online payment processing fees

Freelancers don’t have the time to wait around for international bank transfers to arrive. As a result, it’s very common to get paid through Stripe or PayPal nowadays, as it’s much safer and faster than it once was. The one caveat is the small fee that must be paid to the platform.

This can become an awkward situation if it’s not discussed prior to payday. It’s smart to add the fee as an item before you send the invoice to your client by email, ensuring you don’t lose out on any money from the agreed rate for your product or service.

2. Late payment fees

Chasing clients for payment is never fun, and yet many freelancers are left hanging around for weeks without getting paid. This can cause chaos with your cash flow, and considerable stress if money is tight.

If clients do get slack, try adding a late payment fee to the invoice, and then increase it for every day that passes. That can suddenly prompt them into action!


3. Consultation fee

The early days with a new client involve a lot of discussion through emails and Skype chats, plus time spent crafting proposals, quotes, and contracts. This can add up quickly, taking away from the time that could be spent earning.

By using Bonsai's freelance time tracking tool, you can keep track of this time and deliver accurate invoices that ensure you get paid for all the time you work for a client.

4. Research time

Regardless of the industry or topic, you’re almost certainly going to sink some time into research. It’s essential to deliver premium-quality work, otherwise, you will struggle to create a product aligned with your client’s goals and vision.

A time-tracking tool will help you calculate how much time you spend researching topics and compiling your notes.

How to apply billed expense income to your invoices

Ideally, you should clarify everything from the outset with a proposal or itemized cost sheet, which you can send via email to prospective new clients before engaging in any lengthy communications. If they read this and are still happy to proceed to a consultation call, you can be confident they are a serious client.

When it comes time to invoice your clients, you need to be able to list everything with precision, otherwise, it only invites the potential for debate. You should track time for:

  • Consultation calls
  • Creation of quotes, proposals, and contracts
  • Research

And also, take note of any expenses you incur while doing the project, such as:

  • Using software or online tools for project management, creative or topic research
  • Skype or phone charges
  • Payment fees

By keeping a close watch throughout the project, you will be able to create accurate invoices that include all billable expense income that you outlined in the beginning.

Expense tracking with Bonsai allows you to centralize your freelance career, making it easier to effectively track projects and create professional invoices for all your clients.


Get paid what you are worth

After you do some time-tracking for a few weeks, you can perform an in-depth assessment of your client base to see what each relationship is worth to you. Some time-consuming customers may prove more hassle than they're worth.

While offering a free 30-minute consultation is a nice touch for new clients, you should set boundaries on how much free time you give away. Beyond that, you are well within your rights to charge for extra time, effort, and work that you spend helping your client towards their goals.

Make everything crystal clear in your initial proposal, get a solid written contract, and then follow through by including billed expense income where you deem fit. This professional approach to your career will ultimately help you get paid what you deserve.

Join Bonsai today to discover what your freelance clients are worth to you.

Track your time effectively and create professional invoices with Bonsai.
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