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Not all expenses are the same. Some are costs you pass on to a client, while others are general business expenses you absorb. Understanding the difference is important for accurate invoicing, bookkeeping, and tax reporting. This guide explains the two expense types, how categories work, and how markup affects billing.

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The Two Expense Types

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Billable (External)

Billable expenses are costs you incur as part of delivering work for a client, which you then charge back to them. They are “external” because the cost flows through to the client. Characteristics:
  • Linked to a specific gig
  • Appear as line items on client invoices
  • Can have a margin (markup) applied
  • Examples include:
ExpenseScenario
TravelTrain to client’s office for a workshop
AccommodationHotel for multi-day on-site engagement
MaterialsHardware components for a client project
SoftwareLicense for a tool required by the client
SubcontractorSpecialist brought in for part of the project
PrintingBrochures or materials produced for the client
When to use: Whenever you spend money specifically because of a client engagement, and the agreement allows you to bill the cost.

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Non-billable (Internal)

Non-billable expenses are general business costs that you bear yourself. They are “internal” to your business operations and are not charged to any client. Characteristics:
  • Not linked to a specific gig (optional linking for cost tracking)
  • Never appear on client invoices
  • Tracked for bookkeeping and tax deduction purposes
  • Examples include:
ExpenseScenario
Office suppliesPens, paper, printer cartridges
Software subscriptionsAccounting software, project management tools
Professional developmentCourses, certifications, conference tickets
Office rentCo-working space membership
InsuranceProfessional liability insurance
MarketingWebsite hosting, business cards
When to use: For any legitimate business expense that is not tied to a specific client deliverable.

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How to Decide: Billable or Non-billable?

Ask yourself these questions:
  1. Would I have incurred this cost if not for this specific client project?
    • Yes, it is billable: Travel for a client meeting
    • No, it is non-billable: Your general internet subscription
  2. Does the client agreement allow me to pass on this cost?
    • Many contracts specify which expense types are reimbursable
    • When in doubt, check the agreement or ask the client
  3. Is the expense directly attributable to a single project?
    • Billable: A domain name purchased for the client’s project
    • Non-billable: Your general Adobe Creative Cloud subscription
Some expenses fall in a grey area. A general software subscription that you use across many projects is typically non-billable. A specific license you bought solely for one client’s project is billable.

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Expense Categories

Categories help you organize expenses by nature. Aourly comes with common categories, and your company can configure additional ones.

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Default Categories

Typical categories include:
  • Travel
  • Accommodation
  • Meals & Representation
  • Materials & Supplies
  • Software & Licenses
  • Equipment
  • Office & Administration
  • Professional Services
  • Marketing
  • Other

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Custom Categories

Company owners can add custom categories to match their business needs. For example, a design freelancer might add “Printing & Production” or “Stock Photos”, while a developer might add “Cloud Services” or “Testing Devices”.

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Category Best Practices

  • Be consistent: Use the same category for similar expenses every time
  • Be specific: If you frequently have expenses for “Cloud Services”, create a dedicated category rather than lumping them under “Software”
  • Think about reporting: Categories are used in expense reports. Choose categories that will give you meaningful insights

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Margin (Markup) on Billable Expenses

When you incur costs on behalf of a client, you may want to add a markup to cover your time and effort in managing the purchase. This is the margin.

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How Margin Works

  1. The gig has a general markup percentage (e.g., 10%)
  2. When you create a billable expense, the margin is calculated from this percentage
  3. The invoice shows the total: original cost + margin
Example:
  • You buy project materials for 8,000 SEK
  • The gig has a 10% markup
  • The margin is 800 SEK
  • The client is invoiced 8,800 SEK

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Setting the Markup

The markup percentage is set on the gig, not on individual expenses. This ensures consistency across all billable expenses for that project. To change it:
  1. Open the gig
  2. Find the General Markup field
  3. Enter the percentage (e.g., 10 for 10%)

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Markup Best Practices

  • Agree upfront: Discuss the markup with your client before starting work. Include it in the gig terms.
  • Be reasonable: Standard markups for Swedish freelancers range from 5% to 15%.
  • Document it: The approved gig snapshot includes the markup percentage, so both parties have a record of the agreed terms.

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How Types Affect Invoicing

The expense type directly determines whether and how an expense appears on invoices:
TypeOn Invoice?Invoice Line
BillableYesAmount + margin as a line item
Non-billableNeverNot included
When creating an invoice:
  1. Only handled billable expenses linked to the gig are available
  2. Each expense appears as an invoice row with its total (amount + margin)
  3. The expense is then linked to the invoice, preventing double-billing

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Impact on Business Profitability

Tracking both types of expenses gives you a complete picture of your business finances:
  • Revenue: What clients pay you (time + billable expenses with markup)
  • Direct costs: Billable expenses at actual cost (the markup is your profit)
  • Overhead: Non-billable expenses that reduce your net profit
  • True profit: Revenue minus all direct costs and overhead
Without tracking non-billable expenses, you might think you are more profitable than you actually are. Aourly helps you see the full picture.
When in doubt about whether an expense is billable, check your client agreement. Most contracts specify which types of costs can be passed on.
The expense total displayed in Aourly is the sum of all rows plus any margin. The breakdown is always visible so you can see the base cost and markup separately.
Incorrectly marking personal expenses as business expenses can cause issues with Skatteverket. Only track genuine business costs.

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Frequently Asked Questions

Yes, you can change the expense type while the expense is in Unhandled status. Once it has been included on an invoice, the type cannot be changed.
Expense categories are configured at the company level. Owners can add, edit, or remove categories in the company settings.
This depends on how the invoice is configured. The invoice line item typically shows the total amount (cost + markup). The markup percentage itself is not shown to the client unless you choose to itemize it.
Yes. Even though the expense will not be invoiced to the client, linking it to an gig helps you track the total cost of a project, including costs you absorbed.
Common billable categories include: travel (flights, trains, taxi), accommodation, materials and supplies, software licenses specific to the project, subcontractor costs, and printing/production costs.