Expenses clause: which costs the client repays

Sample clause

a six month change management engagement between Fernhill Consulting and a regional health service with sites in three towns

6. Expenses 6.1 The Client must reimburse Fernhill Consulting for the expenses listed in clause 6.2 that it reasonably incurs in performing the Services, at cost and without any markup. 6.2 Reimbursable Expenses are travel between Sites, accommodation where an overnight stay is required, parking, and any third party licence or subscription the Client has approved in writing. 6.3 Fernhill Consulting must provide a receipt or other evidence of payment for each Reimbursable Expense with the invoice that claims it. 6.4 Reimbursable Expenses must not exceed two thousand dollars ($2,000) in any calendar month unless the Client has approved the excess in writing before the expense is incurred. 6.5 The Client is not liable for any other cost of Fernhill Consulting, including office costs, insurance, staff travel to its own premises, professional subscriptions and software it uses generally. 6.6 An amount reimbursed under this clause is reduced by any input tax credit Fernhill Consulting is entitled to claim for the expense.

Sample wording, not legal advice.

Variants

What to negotiate

• The line between cost and overhead

  Suppliers treat anything spent on the engagement as reimbursable. Clients treat anything the supplier needs to run its business as overhead already priced into the rate. Naming the reimbursable categories, then stating expressly that everything else is the supplier's cost, settles it faster than a general reasonableness test.

• The cap and who approves an overrun

  A monthly cap with written approval above it gives the client control without a request for every taxi. The negotiation is the response time on approvals, because a supplier that has to wait a week cannot book a flight at a sensible fare. Three business days is a common answer.

• Markup and third party costs

  Agencies often add a handling percentage to a bought in cost. Clients accept it when it is disclosed as a stated percentage on a stated category and reject it when it appears as cost plus in general terms. The clean version quotes at cost for travel and a named percentage for production purchases.

The risk of leaving it out

With no expenses clause the fee is the whole entitlement, so a supplier who drives four hours to a site absorbs the trip. Suppliers who invoice anyway are making a claim the contract does not support, which the client can simply refuse. Both outcomes cost more in goodwill than the sentence would have taken to write.

Evidence and record keeping

A reimbursement claim is a document exercise on both sides. The client needs enough detail to book the cost correctly and to substantiate its own deduction, and the Australian Taxation Office publishes what records a business has to keep for expenses it claims. Requiring a receipt with the invoice rather than on request is the small drafting change that keeps this simple, because receipts collected months later are the ones that never appear. Where the expense carries tax, reducing the reimbursement by any credit the supplier can claim keeps the arithmetic neutral.

Common mistakes

The clause reimburses reasonable expenses without saying which categories qualify, so reasonableness is argued invoice by invoice. It sets a cap per engagement rather than per month, so the cap is exhausted in week three. It says nothing about approval turnaround, which makes the approval requirement unworkable for travel. And it leaves the tax treatment out, so the client reimburses a gross amount the supplier has already recovered.

Where it sits in a generated document

Expenses sit directly after the fee clause, because the fee clause should state that the fee excludes the amounts this clause covers. In a generated consulting agreement the categories are written as a numbered sub clause rather than a loose list, which makes them quotable in an invoice query. Where an engagement runs long enough to need a monthly claim form, the same generator produces the expense report as a separate document with its own table.

Documents that carry this clause

Consulting agreementAn advisory firm reviews three bakeries over seven weeks. What makes this agreement useful is not the fee clause but the two clauses that say what the advice is not.Expense reportA physiotherapist claims back four days at a conference. The interesting part is not the total but the subtraction: the trip cost one number and the reimbursement is a smaller one.Monthly retainer agreementA studio sells a physio practice twenty four hours a month. Almost every clause exists to answer one question that ordinary contracts duck: what happens to the hours nobody used.

Questions people ask