A payment disbursement is a transfer of money from one account or fund to another. The term is most commonly used in reference to dedicated or public funds like non-profits and corporations. When one company pays another using cash or cash equivalents, it can be said to have made a disbursement.
For example, when an attorney pays third parties for its clients, such as for court or investigation report fees, these payments are considered disbursements.
Disbursements provide a measurement of the cash outflows of an organization. Some other examples of disbursements include:
An accounting entry of disbursement includes information such as:
Disbursements and payments are not quite the same thing. Let’s look at how the two differ.
Payments are normal costs that a business has to pay to cover its daily operations. When a business pays for goods or services that it needs to achieve its goals, the action is considered a payment. Payments could include paying money for things like employee wages, inventory supplies, or consultant’s fees.
Both payments and disbursements involve some kind of money transfer. The main differences are:
Purchasing goods or services that serve the businesses’ operations makes the transaction a payment. Payments are most often subject to standard regulations and rules regarding taxation. Estimated tax payments are one example of a payment.
The term “payment disbursement” can be somewhat confusing, as payments and disbursements are two different things. For our purposes here, we will assume the term refers to disbursements, while the term “payments” will refer to cash payments.
Different kinds of electronic funds transfer (EFT) payments can be used to issue disbursements, such as:
Digital disbursements provide fast transactions and make it possible to pay other parties around the world at any moment.
Disbursements also can fall into several different categories, including:
The speed with which a disbursement is finalized will depend on the type of payment gateway used. Payment processing happens faster for some methods than others.
In general, digital disbursement solutions like the ones mentioned earlier will be faster than physical, paper checks or vouchers.
Selecting the correct disbursement method can allow an organization to initiate payment processing more efficiently and cheaply while saving time and safeguarding the business from fraud.
Here are a few things to keep in mind when considering the right payment gateway for your business.
Here are a few of the most frequently asked questions about disbursements.
A disbursement refers to a payment made in cash. Reimbursement, on the other hand, is a payment made to cover the original disbursement.
If an attorney pays an expense for a client, for example, the cash paid to a third-party will qualify as a disbursement. When the attorney’s law firm then bills the client for those expenses, the payment of such an invoice would be a reimbursement.
Disbursements are not the same as expenses. Certain expenses, such as amortization or depreciation, are considered to be non-cash expenses. Expenses that involve asset purchases could be recorded before cash is paid to the supplier.
When a vendor charges an extra fee to cover payments made for their clients, the charge is referred to as a disbursement fee. If a shipping service pays the taxes required to send a package on behalf of a customer, for example, they may then pass on this cost in the form of a disbursement fee.
Done with slow money transfers?
Runa allows users to transfer digital value of all kinds quickly, conveniently, and at a fraction of the cost of most alternatives. Whether for b2b payments like disbursements or anything else for that matter, Runa makes things easy and simple for all of our customers.
Our platform makes disbursements simple for:
Learn more and book a demo with Runa today!