Pass Through Expense Controls Kit

Pass-through expenses are where services engagements quietly inflate.

This kit installs beginner-safe controls so you can:

• prevent surprise travel and extra charges
• require pre-approval and receipts
• control markups and subcontractor costs
• make invoices auditable and defensible

Not legal advice.

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Beginner-safe definitions

Pass-through expense: A cost charged in addition to labor (travel, meals, lodging, tools, subcontractors).

Markup: Vendor adds a percentage on top of the expense.

Pre-approval: Written approval before the vendor incurs or bills the cost.

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What you will install

1. Expense categories allowed vs disallowed
2. Pre-approval rule and workflow
3. Receipt and evidence requirements
4. Markup policy (default: no markup)
5. Invoice line item standards for expenses
6. Dispute workflow for non-compliant expenses

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Step-by-step implementation

Step 1: Decide what expenses are allowed

Beginner-safe default:

• allow only expenses that are required to deliver the scope and were pre-approved
• disallow anything vague or convenience-based

Common allowed (if pre-approved):

• travel required by scope
• lodging within a policy cap
• tools explicitly required by SOW

Common disallowed (default):

• meals without policy
• first-class travel
• entertainment
• vague "admin fees"
• "miscellaneous"

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Step 2: Install a pre-approval rule (non-negotiable)

Rule:

• no pre-approval reference, no reimbursement

Define:

• who approves
• how approvals are recorded (email reference, ticket ID, form submission)

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Step 3: Install receipt and evidence requirements

Minimum:

• itemized receipt required
• date, purpose, and attendee list if applicable
• tie to project and deliverable or workstream

No receipts means no payment.

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Step 4: Set the markup policy (simple)

Beginner-safe default:

• pass-through expenses billed at cost with no markup

If a markup is allowed (rare), cap it:

• example: max 5 percent with written agreement

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Step 5: Define invoice standards for expenses

Expense invoice lines must include:

• expense type
• date incurred
• amount at cost
• markup (if any) as a separate line
• receipt reference
• pre-approval reference

If your invoices do not have this, AP cannot enforce controls.

Align with:

• invoice-standards-policy-generator
• invoice-integrity

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Step 6: Install a dispute workflow

Dispute is not conflict. Dispute is control.

Workflow:

• flag non-compliant expense line items
• require corrected invoice
• do not pay disputed amounts
• track repeated issues by vendor

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Templates

A) Pre-approval request (copy and paste)

Copyable template (TEXT)
Copy
Subject: Pre-Approval Request: Project Expenses for [Project]

Vendor:
Project:
Expense category:
Estimated amount:
Dates:
Business justification:
Deliverable or workstream impacted:

Approval requested by:
Decision: Approve / Decline / Need more info
Approver:
Approval reference ID (copy this into invoices):

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B) Expense policy (copy and paste)

Copyable template (TEXT)
Copy
Pass-Through Expense Policy (Project)

Rules:
1) Expenses must be pre-approved in writing before being incurred.
2) Expenses must include itemized receipts.
3) Expenses must be billed at cost with no markup unless explicitly approved.
4) Invoices must list expenses as separate line items with date, type, receipt, and approval reference.

Non-compliant expenses will be rejected and must be re-invoiced.

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C) Dispute email to vendor (copy and paste)

Copyable template (TEXT)
Copy
Subject: Invoice Correction Required: Non-Compliant Expenses for [Project]

Hi [Vendor AP Contact],

We reviewed invoice [#] and found expense line items that do not meet the agreed requirements.

Please issue a corrected invoice that includes:
- itemized receipts
- pre-approval reference IDs
- expense type and date
- markup separated (if applicable)

We will process payment once the corrected invoice is received.

Thanks,
[Name]

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Common pitfalls (avoid)

• allowing expenses without pre-approval
• accepting "admin fee" and "miscellaneous" lines
• allowing markups without explicit policy
• not separating expenses from labor on invoices

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Related resources (registry-backed)

• professional-services-sow-acceptance-kit
• time-and-materials-controls-playbook
• invoice-standards-policy-generator
• invoice-integrity
• effective-rate-overrun-estimator