Billing clients for resource expenses

Question

I could use some other designers insights. I'm a freelancer and often I make purchases for my clients - stock photos, website plug ins, domain names, etc.

50% of the time I simply make these purchases through my own account and put a line item on the client's next invoice for reimbursement. Usually I don't mark it up unless it's printing.

I'm rethinking the way I handle this because 1) At busy times the client expenses can be high and I'm "down" X amount of dollars because I pre-paid this expense for the client. 2) It's more work for me entering expense invoices.

I wonder if I should just request Credit Card details for each client for these kinds of purchases. I don't mind #2 so much above, but #1 can be a pain in the butt for large purchases.

Answer 1

There are several issues with this:

At busy times the client expenses can be high and I'm "down" X amount of dollars because I pre-paid this expense for the client.

Never pre-pay with out final approval, preferably in writing, from the client. The approach you currently take could be very costly one day. If you're working on a website project with an out-of-pocket domain, hosting and source files purchase and the client walks you're out of luck.

• hosting: always use a sub-domain, reference: How can I showcase a working example of my past web development work, without linking to the constantly changing live site?
• website plugins: see if there is an available trial period but don't deploy the trial period until the initial development is completed
• stock photos: use the versions with the watermark until the stock photos are approved and/or have the client purchase them during development.

It's more work for me entering expense invoices.

There are plenty of routes you can take without actually forking out the revenue.
Depending on your workflow, if for instance you need to make expenses of X amount during a certain stage in the project, you can incorporate this into the initial brief as material costs. In the initial brief you should be asking about the content anyways and if they say they want stock photography, ask them what budget they have in mind and if they have one you might try asking for that amount up-front.

In the design you should usually use watermarked version of stock photos, allowing you to submit the full design so that the client can sign off on both the design and the photos to be used before you (or they) make any purchases.

I wonder if I should just request Credit Card details for each client for these kinds of purchases. I don't mind #2 so much above, but #1 can be a pain in the butt for large purchases.

Personally I would never do that. You would open yourself up to all sorts of legal issues that could get you fined or even arrested and can have a negative effect on your good name. The issue might not even be your fault, someone in the company might say "I didn't authorize usage of this card" after the fact, making you look bad until they find out person A gave you the authorization but they didn't go through the correct steps meaning the authorization was effectively invalid.

Answer 2

For my freelance design business, I generally pay for resources and bill the client. For things like stock photos, I charge a flat fee ($15 - $20) per photo. Since I have subscriptions to stock sites, I end up making a small profit, which basically pays for my subscription and puts a bit extra in my pocket. Then again, there are months where I might not use enough photos to pay for my subscription, so it probably evens itself out.

For items like themes, plugins, fonts, etc., I pass the cost on to the client, without a markup. With things domain names, I ask the client to purchase the domain themselves, then provide me access to manage the domain.

I've had clients offer me a credit card to make purchases, but generally that's something I avoid. Something I really don't want to be responsible for. If resource charges are adding up, I'd recommend asking for a deposit up front for the project.

Answer 3

In general, ask for a down payment to cover some parts of the expenses. You can charge these expenses at 100% of their value + the rest of the down payment you'd usually charge.

Don't ask for credit cards numbers, that could give you more issues and not many clients are willing to share these info. Plus that also forces you to guarantee these info are kept in a secure manner.

Also, depending where you live... keep in mind that all the expenses you get paid for and get refunded still count partly as a revenue for you. Usually you also get a tax credit for the expenses but the revenue will still increase. Sometimes and for taxes reasons, you might want to stay below a certain bracket to not get in a higher one to save taxes. So whenever possible with big expenses and if your country has different levels of taxation, that can be another reason why it might be better to let the client pay directly for his/her own expenses.

For stock pictures:

I do as Ted Angel, and charge a flat amount. Don't charge exactly what they cost you since as you said, there's time you spend to manage this and there's transaction fees too sometimes. If the client wants to save, they can freely open their own account at a stock picture site and send you the high resolution.

Use the comp or low resolution until the project is fully approved. Then send the full invoice before sending the final files that includes the high resolution. This way you never get stuck buying stock images and not being paid for them.

For plugins & hosting:

Let the client open his own account where you purchase the plugins. You can explain them that this way, they keep full control of the updates and it's their property as well.

This way, you won't have to deal with the renewals either and the client can share his account details with you or add you as an admin on this.

Prints:

Calculate a 20-30% margin added to the real costs of the prints, and order only once you got the payment sent to you.

In general:

Add an extra that will include the management required to deal with the expenses and the extra paperwork.