What is Pass Thru Billing?
Pass thru billing, like cost plus billing, charges customers for costs captured in activities. However, the pass thru markup percentage typically is zero.
Pass thru billing can be established at any level in the activity structure. Typically, it is used in combination with other billing methods and established only at the account category level.
Pass thru billing amounts are not included in any ceiling calculations. The billed/unbilled pass through amounts are stored in a pass thru accrual account category. This lets you use the information in the traditional billed and unbilled accrual accounts in reports and analysis.
Example 1
SBC Consultants may establish a contract maximum at $100,000, plus any travel expenses. They would set up the travel activity or account category to use pass thru billing, so that the travel costs are not included in the contract ceiling amount.
Example 2
MOP Contractors might have a similar contract, but typically, US government contracts require a ceiling on all costs, including travel. Because of the ceiling requirement, MOP must set up their travel activity or account categories as cost plus with zero percent markup. Then, the travel costs are included in the contract total and can have a ceiling limit established.