How to track matter disbursements the firm advances on a client's behalf
When a firm pays something on a client's behalf — a registration fee, a search fee, a certified copy — that disbursement exists the moment the money leaves the firm's account. If it isn't recorded at that point, there's a reasonable chance it will never be invoiced.
The problem isn't that fee earners forget to reclaim costs. The problem is that there's no system to make forgetting difficult.
Why disbursements go unrecovered
Disbursements are lost for four specific reasons:
The cost was noted informally. A sticky note, a text message, a margin note on a printed document. When the final bill is raised, nobody knows exactly what was paid or whether it's already been billed.
The file was closed before all costs were in. The matter is marked complete when the deed completes, not when every invoice from a third party has arrived. A disbursement that arrives after file closure has nowhere to go.
Disbursements and fees get lumped together. Many practices combine professional fees and disbursements into a single figure. When a client queries the bill or pays short, it becomes impossible to identify what relates to what.
No one was given responsibility for it. When anyone can log a disbursement, it's often the case that no one does.
What information must be recorded at the point of payment
Every time the firm advances a cost on a client's behalf, four pieces of information must be captured before moving on:
- Who was paid and for what. The payee and the exact description.
- How much was paid. The exact amount, with the receipt attached.
- When payment was made. The date the money left the firm, not the date on the invoice.
- Which matter it belongs to. The file reference.
Without those four fields, the disbursement exists but can't be recovered in any reliable way.
How to separate disbursements from professional fees on the matter file
Professional fees are the firm's charge for its work. Disbursements are costs the firm has paid out on the client's account. They are different things and should sit in separate columns on the matter financial record.
That distinction has practical consequences.
When a client reviews a bill, they can see what they are being charged for the firm's time and what they are being charged for expenses the matter has incurred. That transparency reduces payment disputes.
If a matter collapses before completion, disbursements already paid out can be recovered even if the professional fees are calculated differently. Without that separation, the distinction is very hard to defend.
When to check for unbilled disbursements
There are three moments when the matter file should be opened to check whether costs remain outstanding:
Before raising the final bill. The matter financial record shouldn't be closed until it has been checked for disbursements that haven't yet appeared on any invoice.
When a matter runs longer than expected. A file that has been open for several months may have costs from earlier stages that should have been billed already. A periodic check of open disbursement status catches this before the gap grows.
When a client makes a partial payment. Before allocating that payment, the firm needs to know exactly what's outstanding: professional fees, billed disbursements, unbilled disbursements. Without that inventory, the partial payment creates confusion at the next billing stage.
The minimum record that actually works
No complex system is needed. What is needed is that the system exists and that everyone in the practice uses it the same way.
A working disbursement record has:
- One row per disbursement, entered at the time it's incurred.
- The matter reference it belongs to.
- The status: unbilled, billed, or collected.
- The receipt attached or referenced.
The rule is a single one: if it's not in the record, it doesn't exist. That forces the entry to happen at the time, not when someone remembers.
File closure as the last checkpoint
A file isn't closed until every disbursement has the status "collected". If the review before closure turns up a disbursement marked "unbilled" or "billed but not collected", that cost is dealt with before closing.
File closure is the last opportunity to catch what may have been missed. Close it without reviewing and the error stays buried.
At VerifyAct we build tools to help practices stay organised and error-free. Get in touch if that sounds useful.