4.2h

Lost to approvals/wk

$10,900

Annual savings

96%

Compliance rate

Billable vs Non-Billable Expenses in a Law Firm

A practical, data-backed guide to controlling costs and automating expense workflows.

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and easily manage employee travel and expenses

Billable and non-billable expenses are two distinct categories that can significantly impact the financial health of a small law firm. Understanding the difference between these expenses is crucial for effective expense management for law firms, as it directly affects client billing and profit margins. For instance, billable expenses are reimbursed to clients, while non-billable expenses are typically absorbed by the firm.

Incurdesk expense report "Expense Categories" with columns Category, Reimbursed to Client, Absorbed by Firm, listing Billable Expenses, Non-Billable Expenses, Travel Expenses — Billable vs Non-Billable Expense Categories (sample data)

Billable Expenses: Definition and Reimbursement

Billable expenses are those costs directly associated with providing services to clients and generating revenue for your law firm. These expenses can include travel, meals, lodging, and other incidentals that are necessary for a lawyer to perform their duties.

However, some states like California and Illinois require employers to reimburse all necessary business expenses, regardless of wage level.

In California, Labor Code §2802 indemnifies employees for all necessary expenditures or losses incurred in direct consequence of their duties, including a reasonable portion of remote work expenses like internet and cell phone use.

Expense Type	Examples
Billable Expenses	Travel, meals, lodging, and other incidentals necessary for a lawyer to perform their duties

Incurdesk approval queue "Billable Expenses Approval Queue" showing 3 expenses awaiting review, including Travel to client meeting (Pending), Lodging for conference (Pending),... — Billable Expenses Waiting for Approval (sample data)

Total Reimbursement

FREE CALCULATOR

Per Diem Rate

Number of Days

Incidental Expenses

Rate source: 2026-2027 High-Low Substantiation Method. Check the current rate before you pay.

Non-Billable Expenses: Definition and Reimbursement

Non-billable expenses are costs incurred by a law firm that are not directly related to client work or billable hours. These expenses can include overhead costs, such as office rent, utilities, and equipment, as well as non-client related expenses like training and professional development for staff.

Examples of non-billable expenses include:
Office supplies and materials
Staff salaries and benefits (beyond the lawyer FTE)
Marketing and advertising expenses
Insurance premiums
Bank fees and interest charges
Charitable donations

When tracking non-billable expenses, it's essential to separate them from billable expenses to ensure accurate financial reporting and compliance with tax laws. Non-billable expenses are typically not reimbursed by clients, but rather absorbed by the law firm as a business expense.

To manage non-billable expenses effectively, law firms should regularly review and adjust their budgets to ensure they are allocating resources efficiently.

Incurdesk receipt scan of a Office Depot receipt for $120.50, read automatically and filed under Office Supplies — Example of a non-billable office supply expense (sample data)

For the transportation industry, special M&IE rates apply: $80 for travel within CONUS and $86 for travel outside CONUS.

Travel Location

M&IE Rate (2026-2027)

CONUS - High-Cost Localities

$329

$86

72.5 cents (Jan 1 - Jun 30), 76 cents (Jul 1 - Dec 31)

CONUS - Other Localities

$230

$74

CONUS - Transportation Industry

Varies

$80 (within CONUS), $86 (outside CONUS)

Incurdesk approval queue "Pending Expenses" showing 3 expenses awaiting review, including Travel to client meeting (Pending), Office supplies (Pending), Dinner meeting with... — Expenses waiting for manager approval in a small law firm (sample data)

State-Specific Reimbursement Laws and Requirements

As a law firm owner or office manager, it's essential to understand the reimbursement laws and requirements in your state. To ensure compliance, research your state's laws and regulations regarding employee reimbursement.

Some states have specific requirements for employee reimbursement, such as:

Keeping accurate records of expenses
Providing employees with a reimbursement policy
Limiting the amount of reimbursement

Additionally, some states have specific rules for reimbursing employees for mileage, meals, and other expenses. For example:

To stay compliant, regularly review your state's laws and regulations and update your reimbursement policies accordingly. You can check your state's website or consult with a lawyer for more information.

As a result, it's essential to carefully manage your expenses and ensure that you're in compliance with state-specific reimbursement laws.

Action Item:

State Reimbursement Requirements

Varying Varying

Incurdesk expense policy "Reimbursement Policy" with rules such as Provide accurate expense records (Compliance with state laws); Offer a reimbursement policy to employees... — State-specific reimbursement laws and requirements to follow (sample data)

The Impact of AI on Billable Work and Client Billing

The increasing use of artificial intelligence (AI) in law firms is transforming the way lawyers work and bill clients. One area where AI is making a significant impact is in electronic research.

By doing so, firms can provide clients with accurate estimates of costs and avoid any potential disputes.

When billing clients for AI-assisted tasks, law firms should clearly outline the scope of work, the tools used, and the expected outcomes. This transparency will help clients understand the value of the services provided and enable them to make informed decisions about their legal expenses.

Tax rules, limits and rates change. Confirm current figures with the IRS or your accountant before you file.

Keeping this simple: Incurdesk lets your team snap a photo of a receipt and fills in the details for you. It is built for small law firm teams. Try it free.

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