Question about billing client for travel costs
#1
Original Poster
Join Date: Feb 2006
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Question about billing client for travel costs
Good evening from Akaroa NZ.
I work as a freelancer and usually do one or two weeks at a time for out of town clients. I usually return home and work for a week before heading to a different client. I bill the client for RT travel that I always book myself. Soon I will start flying to work at one client for a week, then flying directly to a different client before heading home.
If you do this same type of work, how do you bill each client for the flights? Do you split the cost of that flight from one client to the next ? I'm sure I could double bill the flight cost, but that doesn't feel like the right thing to do.
Thanks for your feedback!
I work as a freelancer and usually do one or two weeks at a time for out of town clients. I usually return home and work for a week before heading to a different client. I bill the client for RT travel that I always book myself. Soon I will start flying to work at one client for a week, then flying directly to a different client before heading home.
If you do this same type of work, how do you bill each client for the flights? Do you split the cost of that flight from one client to the next ? I'm sure I could double bill the flight cost, but that doesn't feel like the right thing to do.
Thanks for your feedback!
#2
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You shouldn't charge your clients more in total than your actual cost (unless you bill on the basis of a contract that doesn't allow reimbursement of travel costs). Usually one would explain the calculation, for example with three one way fares, You-A-B-You, where A would pay You to A fare + 1/2 of the A to B fare and B would pay B to You fare + 1/2 of the A to B fare, assuming that each is less than a You to A RT and Your to B RT respectively. [You could also justify some more complicated calculations, but this one seems simple and fair.] In general this is the cost allocation or transfer pricing problem, which has been studied in accounting and other fields.
Where this could become a problem is if either A or B wants the fact that you are working for them to be confidential. In that case, A might be able to guess the identity of B from knowing where you fly after A and similarly for B. In this case, it would be better to just do two separate RTs, even if it's more travel time for you and more cost for each client.
Where this could become a problem is if either A or B wants the fact that you are working for them to be confidential. In that case, A might be able to guess the identity of B from knowing where you fly after A and similarly for B. In this case, it would be better to just do two separate RTs, even if it's more travel time for you and more cost for each client.
#3
Original Poster
Join Date: Feb 2006
Location: mci
Programs: aa
Posts: 669
You shouldn't charge your clients more in total than your actual cost (unless you bill on the basis of a contract that doesn't allow reimbursement of travel costs). Usually one would explain the calculation, for example with three one way fares, You-A-B-You, where A would pay You to A fare + 1/2 of the A to B fare and B would pay B to You fare + 1/2 of the A to B fare, assuming that each is less than a You to A RT and Your to B RT respectively. [You could also justify some more complicated calculations, but this one seems simple and fair.] In general this is the cost allocation or transfer pricing problem, which has been studied in accounting and other fields.
Where this could become a problem is if either A or B wants the fact that you are working for them to be confidential. In that case, A might be able to guess the identity of B from knowing where you fly after A and similarly for B. In this case, it would be better to just do two separate RTs, even if it's more travel time for you and more cost for each client.
Where this could become a problem is if either A or B wants the fact that you are working for them to be confidential. In that case, A might be able to guess the identity of B from knowing where you fly after A and similarly for B. In this case, it would be better to just do two separate RTs, even if it's more travel time for you and more cost for each client.
The clients do have remain confidential, but the areas I fly into and out of wouldn't give it away.
#4
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I would take the cost of the circle trip and distribute it proportionally to the two clients based on home-destination roundtrip fare.
For example, if home-A is $500 roundtrip, home-B is $700 roundtrip, and A-B is $400 roundtrip, the circle trip would be $800. Client A gets billed $800 * 500 / (500+700), which is $333.33. Client B gets billed $800 * 700 / (500+700) which is $466.67.
Suppose A is close and cheap while B is far and expensive, and home-A roundtrip is only $100 but home-B (and the A-B) roundtrip is $1200. Circle trip is $1250. Client A is billed $1250 * 100 / (100+1200) = $96.15 while client B is billed $1250 * 1200 / (100+1200) = $1153.85.
For example, if home-A is $500 roundtrip, home-B is $700 roundtrip, and A-B is $400 roundtrip, the circle trip would be $800. Client A gets billed $800 * 500 / (500+700), which is $333.33. Client B gets billed $800 * 700 / (500+700) which is $466.67.
Suppose A is close and cheap while B is far and expensive, and home-A roundtrip is only $100 but home-B (and the A-B) roundtrip is $1200. Circle trip is $1250. Client A is billed $1250 * 100 / (100+1200) = $96.15 while client B is billed $1250 * 1200 / (100+1200) = $1153.85.
#5
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I have billed home client home RT cost for that was what was stipulated in my contract.
If it happens that going directly from A to B makes sense in time and my cost I usually make it a getaway weekend and fly DW in if she is not along for the trip as an assistant.
If it happens that going directly from A to B makes sense in time and my cost I usually make it a getaway weekend and fly DW in if she is not along for the trip as an assistant.
#6
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The key to billing clients for travel is complete transperency. You need to have worked this out with the client fully and then explain it in your invoice. If you fly A-B-C-A where Client 1 is at B and Client 2 is at C, it is likely entirely reasonable to split the cost of the ticket either straight up or in some proportional way, but then explain it in your invoice. E.g., total cost of ticket is $1,500 and $750 is allocated to Client 1.
Given that the locations apparently do not disclose client confidences, providing the full routing is not an issue for you. Others will need to work this out with clients and perhaps provide redacted ticket receipts.
Double-billing for a US taxpayer creates income for you (or for your business). If your total air ticket costs $1,500 and you bill a total of $2,000 for it, you then create income of $500 and will need to make accounting allowances to deal with it. Generally an invitation to an audit and gets expensive to track and report correctly.
In the end, you and your client are two businesses. There may be reasons for everything and it is rare that these things cannot be worked out between professionals. When they cannot, it is the sign of a bad relationship and you need to give some thought as to how much you want to do business with people who make life needlessly difficult.
Given that the locations apparently do not disclose client confidences, providing the full routing is not an issue for you. Others will need to work this out with clients and perhaps provide redacted ticket receipts.
Double-billing for a US taxpayer creates income for you (or for your business). If your total air ticket costs $1,500 and you bill a total of $2,000 for it, you then create income of $500 and will need to make accounting allowances to deal with it. Generally an invitation to an audit and gets expensive to track and report correctly.
In the end, you and your client are two businesses. There may be reasons for everything and it is rare that these things cannot be worked out between professionals. When they cannot, it is the sign of a bad relationship and you need to give some thought as to how much you want to do business with people who make life needlessly difficult.
#7
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First, you need to be open with the clients and make sure they are approving of any billing adjustment you are planning.
Second, to me, you need to do proportional billing as that takes into account different airfares. If it was me, I would price out the price of a round trip from my home airport for both locations on the date I am making the circle trip reservation. I would then proportion that circle trip cost to the clients based on the round trip costs for each flight. I would also make sure I kept a screenshot or printout of each roundtrip flight to back up my calculations.
In no case should the cost be greater to a client than the round trip fare.
Second, to me, you need to do proportional billing as that takes into account different airfares. If it was me, I would price out the price of a round trip from my home airport for both locations on the date I am making the circle trip reservation. I would then proportion that circle trip cost to the clients based on the round trip costs for each flight. I would also make sure I kept a screenshot or printout of each roundtrip flight to back up my calculations.
In no case should the cost be greater to a client than the round trip fare.
#9
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For a MCI-ATL-SCL-MCI trip, since Santiago de Chile is so far away, it might be simpler to bill client A for MCI-ATL and bill client B ATL-SCL-MCI
#10
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In my agreements with clients, I state that the airfare that they are covering may be to / from a city other than my base. When scheduling my visit I let the client know if I am flying from / to an unexpected airport.
In your case I would bill the ATL client for the MCI-ATL journey with the note that that the onward travel was "covered by others"
I would invoice the SCL Client for ATL-SCL then SCL-MCI as they are expecting to pay for a round trip international flight.
In your case I would bill the ATL client for the MCI-ATL journey with the note that that the onward travel was "covered by others"
I would invoice the SCL Client for ATL-SCL then SCL-MCI as they are expecting to pay for a round trip international flight.
#11
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Made easier if you know ahead of time that a business trip will involve multiple destinations for multiple clients. The last time I had one of these I had three one-way tickets:
Ticket 1: Home -> City 1 (charge 100% to Client 1)
Ticket 2: City 1 -> City 2 (charge 50% to Client 1, 50% to Client 2)
Ticket 3: City 2 -> Home (charge 100% to Client 2)
That just seemed simpler than showing both clients three different receipts and splitting the overall trip 50/50. As far as Client 1 is concerned, their responsibility is to get me to where I need to be after City 1. Client 2's responsibility is to get me from where I happened to be before business with them and then to where I need to be at the conclusion of business with them.
It gets more complicated when a destination change/unplanned second trip pops up mid-trip.
But generally my clients understand they have to get me from where I happen to be (may not always be home) to where they need me to be to where I need to be (may not always be home) at the conclusion of business for that client.
Ticket 1: Home -> City 1 (charge 100% to Client 1)
Ticket 2: City 1 -> City 2 (charge 50% to Client 1, 50% to Client 2)
Ticket 3: City 2 -> Home (charge 100% to Client 2)
That just seemed simpler than showing both clients three different receipts and splitting the overall trip 50/50. As far as Client 1 is concerned, their responsibility is to get me to where I need to be after City 1. Client 2's responsibility is to get me from where I happened to be before business with them and then to where I need to be at the conclusion of business with them.
It gets more complicated when a destination change/unplanned second trip pops up mid-trip.
But generally my clients understand they have to get me from where I happen to be (may not always be home) to where they need me to be to where I need to be (may not always be home) at the conclusion of business for that client.
#12
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The key is to have covered all of this with your client in your engagement letter. All of the above approaches seem reasonable. All of them are routine. The key is to disclose all of this and make it plain in the agreement. Particularly when there are changes in personnel at a client, it can be important for client relations purposes to have this all written down.
#13
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Made easier if you know ahead of time that a business trip will involve multiple destinations for multiple clients. The last time I had one of these I had three one-way tickets:
Ticket 1: Home -> City 1 (charge 100% to Client 1)
Ticket 2: City 1 -> City 2 (charge 50% to Client 1, 50% to Client 2)
Ticket 3: City 2 -> Home (charge 100% to Client 2)
That just seemed simpler than showing both clients three different receipts and splitting the overall trip 50/50. As far as Client 1 is concerned, their responsibility is to get me to where I need to be after City 1. Client 2's responsibility is to get me from where I happened to be before business with them and then to where I need to be at the conclusion of business with them.
It gets more complicated when a destination change/unplanned second trip pops up mid-trip.
But generally my clients understand they have to get me from where I happen to be (may not always be home) to where they need me to be to where I need to be (may not always be home) at the conclusion of business for that client.
Ticket 1: Home -> City 1 (charge 100% to Client 1)
Ticket 2: City 1 -> City 2 (charge 50% to Client 1, 50% to Client 2)
Ticket 3: City 2 -> Home (charge 100% to Client 2)
That just seemed simpler than showing both clients three different receipts and splitting the overall trip 50/50. As far as Client 1 is concerned, their responsibility is to get me to where I need to be after City 1. Client 2's responsibility is to get me from where I happened to be before business with them and then to where I need to be at the conclusion of business with them.
It gets more complicated when a destination change/unplanned second trip pops up mid-trip.
But generally my clients understand they have to get me from where I happen to be (may not always be home) to where they need me to be to where I need to be (may not always be home) at the conclusion of business for that client.
#14
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I don't like proportional billing of the middle segment because flight pricing is market based, not distance based. We take advantage of that when we do positioning flights so I wouldn't think it's fair to clients to pay more in those cases where it works against them. And what if your plans change, how do you split the change fees and fare differences?