{"id":39106,"date":"2023-02-17T11:34:43","date_gmt":"2023-02-17T11:34:43","guid":{"rendered":"https:\/\/toggl.com\/blog\/?p=39106"},"modified":"2025-11-11T15:38:07","modified_gmt":"2025-11-11T15:38:07","slug":"project-expense-tracking","status":"publish","type":"post","link":"https:\/\/toggl.com\/blog\/project-expense-tracking","title":{"rendered":"Project Expense Tracking: 6 Steps To Stay On Budget"},"content":{"rendered":"\n

Project expense tracking is critical for any business that delivers client projects. But many businesses struggle to track project expenses accurately. <\/p>\n\n\n\n

In this guide, we’ll show you to track project expenses accurately and a couple of tools you can use to make project expense tracking a breeze.<\/p>\n\n\n\n

What project expenses should you track?<\/h2>\n\n\n\n

Before you begin tracking costs, defining a project expense is essential. This will help you monitor and record the right<\/em> project expenses \u2014 helping you to calculate project profitability<\/a> accurately. <\/p>\n\n\n\n

Typical project costs in the agency and professional services world fall into three categories:<\/p>\n\n\n\n

    \n
  1. Labor costs<\/strong> – your teams billable and non-billable time per hour<\/li>\n\n\n\n
  2. Contractor costs<\/strong> – freelancers you may work with on a project<\/li>\n\n\n\n
  3. Pass-through expenses<\/strong> – project costs that you don\u2019t pocket <\/li>\n<\/ol>\n\n\n\n

    Every project has some or all of these costs, and when unaccounted for,  this is where you’ll see the project budget go up in smoke. \ud83d\udd25<\/p>\n\n\n\n

    Let\u2019s break down each one to better understand what we\u2019re dealing with.<\/p>\n\n\n\n

    Note: <\/strong>we will not be covering overhead costs \u2014 only costs you need to consider for individual projects<\/em>.<\/p>\n\n\n\n

    1. <\/strong>Labor costs <\/h3>\n\n\n\n

    Labor costs are the expenses associated with paying your team for working on a client project.<\/p>\n\n\n\n

    Many businesses make the mistake of only considering the salary they\u2019re paying employees.<\/p>\n\n\n\n

    In reality, the true labor cost of an employee (known as the Fully Loaded Cost) is that person\u2019s annual salary plus any additional burden costs.<\/p>\n\n\n\n

    A basic fully loaded cost formula looks like this:<\/p>\n\n\n\n

    Fully Loaded Cost = Yearly Salary + Benefits + Training & Tools<\/p>\n\n\n\n

    For example, say you pay your employee Emma $100,000 per year \u2014 her fully loaded cost may look like this:<\/p>\n\n\n\n

    Expense<\/strong><\/th>Cost<\/strong><\/th><\/tr><\/thead>
    Salary<\/td>$100,000<\/td><\/tr>
    Benefits<\/td>$10,000<\/td><\/tr>
    Training and tools<\/td>$3,000<\/td><\/tr><\/tbody>
    Fully Loaded Cost<\/em><\/strong><\/td>$113,000<\/em><\/strong><\/td><\/tr><\/tfoot><\/table><\/figure>\n\n\n\n

    Once you know an employees Fully Loaded Cost, you can quickly work out their labor cost per hour.<\/p>\n\n\n\n

    Labor cost per hour = fully loaded cost \/ 2,080 hours<\/p>\n\n\n\n

    Note:<\/strong> you can use 2080 working hours in a year for salary calculations. When working full-time at a standard 8 hours per day, five days a week, you get 40 hours per week.<\/p>\n\n\n\n

    Emma\u2019s labor cost per hour would be $54.32 per hour<\/em><\/strong>.<\/p>\n\n\n\n

    This is what you need to track in your project expense tracking system! (more on this later).<\/p>\n\n\n\n

    2. Contractor costs<\/h3>\n\n\n\n

    Contractor costs are associated with hiring freelancers, experts, or anyone outside the agency to help with a project. <\/p>\n\n\n\n

    For example, hiring a graphic designer to create images for an ad campaign or an SEO expert to optimize your website for search. <\/p>\n\n\n\n

    Contractor costs tend to be higher than the labor costs for in-house employees doing the same job, but an agency can rarely do everything independently.<\/p>\n\n\n\n

    All you need to do is add the contractor flat or hourly rate<\/a> to your project expense tracking system.<\/p>\n\n\n\n

    3. Pass-through expenses<\/h3>\n\n\n\n

    Pass-through expenses, also known as reimbursable expenses, are any other costs your agency incurs, on behalf of the client, in direct relation to the project (that are not overheads).<\/p>\n\n\n\n

    Some examples include<\/p>\n\n\n\n