Can My Business Charge Customers for Expenses?

As a business-to-business (B2B) supplier, you might often incur additional costs on behalf of your customers, which are directly related to your services. These costs might include travel expenses, accommodation, or other general business expenses you need to spend to complete a customer’s project. You might wonder if you can pass these expenses on to your customers. This article explores a commercial contract, why you might need to charge customers for these expenses, and the importance of clearly defining these charges within your contractual agreements.

What is a Commercial Contract?

A commercial contract is a legally binding agreement between two or more businesses that sets out the terms and conditions of their business relationship. These contracts typically include critical terms that govern various aspects of business transactions, including payment terms, deliverables, and liability provisions.

If you intend to charge your business customers for expenses, you must ensure your contracts clearly and precisely set out which fees you will charge to your customers. Without explicit terms, you could find yourself in a difficult situation where a customer disputes the expenses, potentially leaving you out of pocket. This can be particularly damaging for a small business. 

Why Might You Need to Charge Customers for Expenses?

In a B2B setting, charging customers for expenses is vital to ensure your business does not have to absorb costs directly related to delivering your services. 

Various scenarios may require you to charge customers for additional expenses, such as:

Travel Costs

Does your team need to travel to meet clients or attend meetings? If so, you could incur significant travel, hotel expenses, and meal costs such as the costs of your train ticket to a client’s business. Charging these expenses to the customer will ensure that your business avoids bearing these costs unnecessarily. 

Specialist or Third-Party Services

Do you need subcontractors to complete an aspect of the customer project? If so, the customer will need to cover the cost of their services, including any related expenses. Without an explicit contractual agreement, you could cover these costs, impacting your business’s bottom line.

What Should Your Contract Say About Charging Customers for Expenses?

You must ensure the customer agrees that your expenses will be the customer’s responsibility. Before you proceed to charge customers for additional expenses, make sure your contract covers this. 

Your contract should specify the conditions under which you can make these charges in your commercial contract. Your contract terms must clearly define which expenses you can charge, how you will calculate them, and any limitations or conditions. This will prove that you and your customer have agreed upon expense payments and allow you to enforce these terms.

Your business should consider the following:

• your contract should clearly define which expenses you will charge and why. For example, it should set out which expenses you will charge, such as travel, accommodation, meals, and telephone or postage costs. By being clear on these costs, you will promote transparency with your customers, and they will know upfront what to expect. Further, you will be less likely to fall into disputes over expense claims; and
• explain how you will calculate expenses and when they will be charged. This level of detail helps you avoid misunderstandings later.

You should also ensure your team keeps hold of supporting documentation, such as receipts, invoices, or timesheets, to substantiate expense claims. This documentation provides the necessary evidence if a customer questions the charges, reinforcing the legitimacy of your claims.

Why is It Important to Be Clear on Expenses?

Your contract must leave no room for ambiguity or potential arguments with your customers – such as customers complaining that you have overcharged them. Customers who know exactly what will be charged are less likely to dispute your charges. In contrast, vague or unclear terms can lead to significant issues, such as customers refusing to pay for legitimate expenses because you did not adequately inform them and your contract did not cover them.

You should ensure that these terms are agreed in writing with your customers and be cautious of the risks if you make verbal agreements about expenses. While verbal contracts may be legally binding, they can be difficult to enforce if disputes arise.

You should note that certain customers may oppose your expense clauses or seek further control over expenses. For example, they might state that they must approve any costs you incur in writing first. As such, you should be prepared to openly discuss these issues with your customers. This should keep them happy and maintain strong working relationships.

Commercial Contracts Checklist

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Key Takeaways

Charging customers for expenses is common in B2B relationships. But you must clearly define and agree upon these charges in your commercial contracts. You can prevent potential disputes and legal issues by providing detailed and unambiguous contracts about expense charges.

If you need help drafting or reviewing your contract terms, our experienced contract lawyers can assist as part of our LegalVision membership. For a low monthly fee, you will have unlimited access to lawyers who can answer your questions and draft and review your documents. Call us today at 0808 196 8584 or visit our membership page.

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