Creating a Disbursement from a Firm Withdrawal

In this article:

• Billing a Firm Withdrawal to the Client
• Understanding the Process
• Understanding Taxes on Hard Disbursements

You can create disbursements automatically when entering a firm withdrawal. These are known as hard disbursements and can only be used when using Actionstep Practice Pro + Accounting. 

Billing a Firm Withdrawal to the Client

 To bill a firm withdrawal directly to a client's matter, follow the instructions in Creating a Firm Withdrawal. As you complete these steps, make sure to do the following:

• Choose the matter associated with the withdrawal.
• Select the Bill checkbox to bill that expense to your client's matter.

Understanding the Process

In the following example, court fees have been paid from the business current account. So, when entering this withdrawal, a disbursement against the client matter has also been created so the firm is reimbursed for this expense. 

In the above example, the expense account for disbursements has a corresponding income account for disbursements in the chart of accounts. Since expenses are considered costs, the disbursement will show as an expense in the accounts. However, when this is billed to the client, it will be income (since the client will be paying it to the firm) so it will show as income in the accounts.

So, when a firm withdrawal is entered using the expense account and it is billed to a matter, the disbursement will automatically use the corresponding income account as shown in the example above. 

This disbursement is automatically routed to the corresponding income account as indicated in the chart of accounts. 

Understanding Taxes on Hard Disbursements

When a disbursement is added to a matter from a firm withdrawal, Actionstep first checks the Accounts List to see if there is a disbursement tax code against it. The example above uses the expense GL code 6-3005 which has a disbursements tax of N-T (No Tax) so regardless of what is entered for the firm withdrawal, the disbursement will use this tax code. 

However, if the disbursements tax code is set to Use system default, the tax applied to the disbursement will be inherited from Tax settings defined in the matter's Matter Billing Options.

The Tax setting in Matter Billing Options:

In short, the disbursement will never inherit the tax that is applied when the firm withdrawal is generated. It will be inherited from the options set against the account code in the Accounts List and if set to default, it will inherit the settings defined in the matter's Matter Billing Options. If the latter, then the tax will change if the matter billing tax options are changed. 

Related Articles:

• Creating a Firm Withdrawal
• Entering Disbursements