Project expense tracking means recording every cost tied to a project against that project and client. It covers travel, software, subcontractors, materials and AI usage.
This guide is for agencies, consultancies and other firms that bill clients for projects. It explains which costs to capture, how to tag them and how to rebill them. If you want a tool for the job, see our page on project cost tracking software.
Quick Answer
Project expense tracking is recording each cost against a project and client when it happens. That lets you see true project margin and rebill every expense the contract allows. Tag costs at source, attach receipts and approve them before invoicing.
What is project expense tracking?
Project expense tracking is the habit of logging non-labour costs against the project that caused them. Each entry records the amount, date, category, project, client and whether it is billable.
It sits alongside time tracking. Time is the cost of your people. Expenses are everything else you spend to deliver the work. Together they make up the full cost of a project.
Without both, margin reports flatter the project. A job can look profitable on hours alone and still lose money once travel and licences are counted.
Which project expenses should you track?
Track every cost that would not exist without the project. The table shows common categories, whether they are usually billable and the evidence to keep.
| Category | Usually billable? | Evidence needed |
|---|---|---|
| Travel and accommodation | Often, if the contract allows | Receipts, dates, purpose |
| Subcontractors and freelancers | Yes, often with markup | Supplier invoice, scope |
| Software and licences bought for the client | Depends on contract | Invoice, licence term |
| Materials and printing | Usually | Receipts or supplier invoice |
| AI and API usage | Increasingly, if agreed | Usage logs, cost per task |
| General overheads | Rarely | Not rebilled per project |
What about AI usage costs?
AI usage is a growing project expense. Token and API costs can be tied to a client task like any other cost. Log the task, the project and the cost so you can decide whether to rebill it.
How do you track project expenses step by step?
Track project expenses by setting categories, capturing receipts, tagging each cost and approving before you invoice. Five steps cover most firms.
- Agree categories. Use a short, fixed list so reports stay consistent across projects.
- Capture receipts at source. Photograph or forward each receipt the day you incur it.
- Tag every cost to a project and client. Mark whether it is billable at the same time.
- Approve on a cadence. Review expenses weekly with timesheets, while details are fresh.
- Pull approved costs onto the invoice. Bill from approved records, not from memory.
If you use Keito, our guide to logging expenses in Keito shows each step in the app.
How do you bill reimbursable expenses to clients?
Bill reimbursable expenses as the contract states: at cost, with a markup, or within a capped budget. Show each item clearly on the invoice so clients can check it.
- At cost. You pass on the exact amount. This is simple and easy to defend.
- With markup. You add a percentage to cover handling and financing. State the rate in the contract.
- Capped. You rebill up to an agreed limit. Track spend against the cap as you go.
Disputes usually come from surprises. Agree the method upfront, attach receipts where asked and bill soon after the cost lands. Our page on reimbursable expense billing covers the process in more detail.
How do expenses change project profitability?
Expenses reduce margin unless you rebill them. The full margin formula includes both time and expenses.
Project margin = (revenue − labour cost − project expenses) ÷ revenue
Say a project bills £20,000. Labour costs £12,000 and expenses come to £3,000, of which £2,000 is rebilled. Revenue rises to £22,000 and margin is (22,000 − 15,000) ÷ 22,000, about 32%. Miss the rebill and margin falls to 25%.
Review this by project each month. Patterns show which clients or project types absorb costs you should recover.
Key Takeaway
Tag every expense to a project and client when it happens. That makes rebilling and margin reporting reliable.
Ready to capture every project cost?
Keito logs expenses and time against the same project so invoices include everything the client owes.
Frequently Asked Questions
What counts as a project expense?
A project expense is any non-labour cost incurred to deliver a specific project. Travel, subcontractors, materials, client software and AI usage all count. General office overheads usually do not.
How do you track expenses for multiple projects?
Tag each expense to one project and client at the moment you record it. Use the same categories across all projects. Then filter reports by project to see spend and billable totals side by side.
Should you mark up reimbursable expenses?
You can mark up reimbursable expenses if the contract allows it. A markup covers handling time and the cost of paying upfront. State the rate in writing so clients are not surprised.
What is the difference between project costs and project expenses?
Project costs are the total cost of delivery, including labour. Project expenses are the non-labour part, such as travel and materials. Tracking both gives you true project margin.
Can time tracking software track expenses too?
Yes, many time tracking tools also track expenses against the same projects. That keeps hours and costs in one place for invoicing. Keito offers time and expense tracking together, including AI-agent costs.