Understanding expenses in Operating
Written By Lauri Eurén
Last updated 24 days ago
Expenses in Operating are how you record costs that aren't time. Where Time entries capture the labor side of a Project's actuals, Expenses capture everything else: contractor invoices, travel, software licenses, equipment, materials. This article explains how the expense system fits together so you can decide how to use it.
Expenses vs. Time entries
Operating tracks Project actuals in two parallel streams:
Time entries — labor cost, captured through time tracking, valued at billing and cost rates.
Expenses — non-labor cost, entered manually, valued at the amount paid (and optionally marked up for billing).
Both flow into the same downstream surfaces: project profitability, planned vs. actuals reporting, revenue recognition for fixed-price Projects, and invoicing. The distinction matters because the lifecycles differ. Time is logged in small daily increments; Expenses tend to come as discrete events tied to a specific invoice or receipt.
Expenses are optional. Operating treats expense tracking as a separable module — an organization can turn it on independently of the invoicing module, which makes Expenses useful even for organizations that don't invoice through Operating but still want cost tracking and forecasting.
The structure of an Expense
A single Expense in Operating is more than just an amount. It's a record made up of:
Top-level fields — date, description, Project, optional Vendor.
One or more line items — each with its own Expense category, amount, markup, and billable flag
Receipts — one or more files attached to the Expense as a whole, not to individual line items.
The multi-line-item model exists because real-world costs often span categories. A contractor's monthly invoice might include consulting work and travel reimbursements — two line items in different categories under one Expense, rather than two separate Expenses to reconcile.
Each line item carries its own:
Expense category — the type of cost (Travel, Subcontractors, Equipment, etc.). The Category determines the markup applied to the line item's cost when invoicing the client.
Description — what the line item covers
Cost — the amount paid, in the Expense's currency.
Billable flag — controls whether the line item generates revenue. Non-billable line items still record cost but never appear on a client Invoice.
Whether a receipt is required for the Expense depends on the categories used across its line items: if any line item uses a category that requires a receipt, the Expense as a whole needs at least one receipt attached before it can be saved
Expense categories
Expense categories are the taxonomy costs are classified under. Operating ships with a curated default set — Travel, Accommodation, Meals, Local Transport, Subcontractors, Software & Licenses, Equipment, Materials, Other — each preconfigured with sensible markup percentages, receipt requirements, and billable defaults.
Categories do three things:
Standardize how costs are recorded. Everyone in the organization uses the same labels, so reporting is comparable across Projects.
Set defaults that line items inherit. A new line item inherits its category's markup and billable default. The billable flag can be toggled per line item.
Roll up costs in reporting. Costs aggregate by category across reporting surfaces — Project, quarter, or organization-wide — with no manual grouping.
Categories are configurable: admins can rename them, change defaults, or add new ones. Organizations that didn't have categories before this release were migrated to a single "Other" default so nothing broke during the transition.
Vendors
A Vendor is the supplier or merchant a cost was paid to — a contractor, an airline, a software company. Vendors are optional metadata on an Expense, but they make reporting cleaner: spend-by-Vendor analysis becomes possible without grepping through descriptions.
Vendors are managed at the organization level. New Vendors can be added inline while entering an Expense, or maintained as a list in settings. Archived Vendors stop appearing in pickers, but their historical Expenses remain intact.
Planned vs. actual Expenses
Expenses follow the same Planned vs. actuals pattern that runs through the rest of Operating's financial model. On the labor side, Allocations represent planned work and Time entries represent actuals. On the cost side:
A Planned expense is a future-dated cost you expect to incur — for example, a subcontractor invoice you know is coming in March. Planned expenses appear in forecasts and on project burnup charts on their planned date.
An actual Expense is the recorded cost once it has materialized.
Planned expenses and actual Expenses are kept as separate records. When a planned cost becomes real, Operating doesn't update the Planned expense in place — it creates a new actual Expense pre-populated with the Planned expense's data, so the original forecast and the recorded reality both exist as their own records.
The Planned expense remains afterward, and that's by design: it sits on the planned side of Planned vs. actuals reporting while the new actual Expense sits on the actuals side. Keeping both is what makes the comparison meaningful — deleting the Planned expense after the actual is recorded would erase the forecast the Planned vs. Actuals report depends on. If only actuals are recorded and never plans, Expenses still work as a pure cost-tracking tool. The forecasting benefit is lost, but nothing else changes.
Expense budgets
Where a Project budget sets the total monetary value of work, an Expense budget sets a category-level allowance within that. For example: a fixed-price Project with a €100,000 budget might carve out €5,000 for Travel and €15,000 for Subcontractors. Anything spent or planned in those categories counts against those targets.
Expense budgets are planning guidelines — they don't directly affect revenue recognition, and they don't block spending beyond the allowance. They make project burndowns more accurate by separating expected non-time costs from labor costs, and they make it visible when one category is trending over while others have headroom.
How Expenses affect Project financials
Expenses interact with Project financials in three ways:
Cost. Every Expense line item's amount counts as cost on the Project, regardless of whether it's billable. This is what feeds gross profit and margin calculations.
Revenue (time-and-materials Projects). A billable line item's invoiceable amount becomes revenue when the Expense is invoiced.
Revenue recognition (fixed-price and capped T&M Projects). Expenses consume Project budget before labor in the recognition flow — so a billable Expense reduces the budget available for revenue from time. If Expenses exceed the budget value, their revenue is capped at the budget.
The cost side is recognized as soon as the Expense is recorded. The revenue side waits for invoicing or recognition rules.
Permissions and visibility
Expense permissions follow a clear rule: if you can see an Expense, you can see its cost. Cost is a fundamental part of what an Expense is. The invoiceable amount and revenue side follow the viewer's existing revenue permission level — someone who can see Expenses without revenue access still sees what was spent, just not what was billed for it.
Three permissions split expense management:
Add expenses controls who can create Expenses.
Manage expenses controls who can edit and delete them.
Manage rates, budgets and planned expenses governs Planned expenses, Expense budgets, and Rate cards together — typically a more senior permission since these shape financial forecasts.
Expense Category and Vendor management has their own permission toggle.