How to make sure client disbursements don't fall through the cracks
Disbursements are money the firm pays on behalf of the client and recovers later: land registry fees, search fees, counsel's fees, and other third-party costs that form part of the matter. They are the client's expense — but until they are recovered, the firm carries them. That gap between payment and recovery is where things go wrong.
In a busy conveyancing or legal practice, disbursements are easy to miss. They arrive from different suppliers at different stages, processed by different people. By the time the matter closes and the final bill goes out, some disbursements have been absorbed without anyone noticing.
Why disbursements get missed
The problem is rarely that no one paid them. The problem is that someone paid them, the invoice landed on a desk or in an email inbox, and no one linked it back to the matter file that day.
In a firm running multiple active matters, third-party invoices — land registry, searches, counsel, specialist reports — get processed through accounts without the matter file being updated in real time. When the fee earner comes to close the file and raise the final bill, some disbursements simply are not there. The receipt is missing, the entry was never made, or there is genuine uncertainty about whether the client was already charged.
The result: the firm absorbs costs that belonged to the client, or raises a late charge that the client questions weeks after the work is done.
Record disbursements when they happen, not when you bill
The only reliable way to track disbursements is to record them in the matter file at the time of payment — not at the point of billing.
This does not require an elaborate system. It requires a habit: whenever money leaves the firm on behalf of a client, that entry goes into the matter file the same day. Date, amount, description, and the reference number of the invoice or receipt.
Whether the matter file lives in a case management system, a shared folder, or a paper file, that entry needs to exist before the receipt has a chance to go missing or be processed by accounts without being attached to the right matter.
What to record for each disbursement
Every disbursement entry in the matter file should include, at minimum:
- Date of payment
- Description (land registry fee, search fee, counsel's fee, expert report)
- Exact amount
- Reference number of the invoice or receipt
- Status: paid by firm / recovered from client / outstanding
The status column is the one that usually gets skipped. Without it, when the file closes there is no quick way to see which disbursements have already been recovered and which are still being carried by the firm.
When to bill disbursements back to the client
There are three common approaches, and each one has its place:
At the end of the matter, in a single final account alongside professional fees. This is the simplest approach to manage, but it can leave the firm carrying third-party costs for months if the matter is protracted.
In stages, attached to each interim invoice. When an interim bill goes out, it includes the disbursements incurred since the last billing point. This reduces the firm's exposure and gives the client ongoing visibility of what is being spent on their behalf.
As they arise, when the amount is significant. A substantial counsel's fee or a large registration fee can be billed on its own, with the supplier's invoice attached, rather than waiting for the matter to close. Some practices request a specific additional retainer payment to cover anticipated third-party costs of this kind.
The right approach depends on what was agreed with the client at the start of the matter. That agreement — and its implications for how disbursements will be handled — should be recorded in the matter file from day one.
Retainers and disbursements
If the firm takes an initial retainer payment, the client care letter or engagement letter should make clear whether that retainer covers professional fees only, or professional fees plus anticipated disbursements. Without that clarity, the client may assume all costs are included, and the firm may find it awkward to raise additional requests later.
When the retainer covers everything, the matter file needs a running balance to show when funds are running low and a top-up is needed. When it covers fees only, disbursements are managed separately — anticipated in advance or charged as incurred, with supplier invoices attached.
At the point of closing
Before the final bill goes out, the billing section of the matter file should show, without ambiguity, the total disbursements incurred, which have been recovered, and which are outstanding. If a supplier invoice sits in accounts and does not correspond to any entry in the matter file, that is the moment to resolve the discrepancy — not after the client has signed off on the final account.
A clean file close depends largely on whether disbursement tracking was done properly throughout the matter.
If you'd like support keeping your practice organised and error-free, VerifyAct has tools built for that.