Disbursement is simply the act of paying out money. It is a payment one makes to another individual or company. Disbursements typically refer to payments involving cash, cash equivalents, or electronic funds transfers. Examples of disbursements include dividend payments, cash expenditures, paying monthly bills, payroll expenses, and money paid out to run a business.
Disbursements are part of the cash flow, and if they exceed revenues, it can be a sign of potential insolvency. Disbursements are usually posted in ledgers such as the accounts payable ledger and the general ledger. A disbursement includes the date, payee name, amount credited or debited, payment method, the purpose of the payment, and its effect on the overall cash balance. The accounts in the ledger vary depending on the nature of the business.
Disbursements track the money flowing out of a business’s accounts. These are different from the actual profit or loss. Keeping track of disbursements helps a company to monitor and record every time money leaves the accounts. It also allows an organization to meet audit requirements, recognize fraud, and plan for the future.
What Is a Disbursement Check?
That covers disbursements, but what is a disbursement check? It refers to a payment made when writing a check from a business account. An organization can create a disbursement check for various types of payments, including payroll expenses, employee salaries, dividend payments to shareholders, profit distributions, payments to suppliers, contractors, and vendors, as well as reimbursements for workers’ out-of-pocket expenses.
The recipients of these checks can cash them or deposit them as they please. Many businesses continue to use checks for disbursements, despite the growing popularity of electronic payments. Checks have been in service for a long period, and many companies continue to use them due to their convenience.
Disbursement checks are not paid immediately; it typically takes a few days for the money to be transferred from the payer’s account. This buys additional time for a company to raise the funds required for payments made by check. However, these checks can be expensive as they can cost between $3 and $20 to write and process.
What Is a Loan Disbursement?
A money lender can either agree to lend you the requested funds or decline to do so. When your loan application gets approved, the lender needs to find a way to transfer the money to you. Loan disbursement is the process of moving cash from the lender’s account to your account.
The lender will then disburse the funds depending on the type of loan. Personal loans are typically deposited directly into the borrower’s checking account, while student loans are often disbursed directly to the school to cover fees and tuition. When you apply for a mortgage loan, the funds are usually paid directly to the seller.
It is essential that you ask your lender how they will disburse the funds. In some situations, you need cash directly, but the lender may only be willing to use other methods to pay the funds.
Cash Disbursement
Cash disbursements or cash payments are typically made at specific intervals, such as quarterly or yearly. The business’s cash flow is used to settle responsibilities such as interest payments, operating expenses, and accounts receivable. Cash disbursements have several payment options, including checks, cash, or electronic fund transfers.
You can use a cash check disbursement to return money to a customer, and it’s normally documented as a decline in sales. You can also pay dividends and record them as a reduction in corporate equity. Cash reductions are typically made through the accounts payable system, although you can also use payroll and petty cash.
You can outsource the check disbursement service to a bank. They will use the funds in that savings or checking account to issue payments approved by the paying individual. Check disbursement service can also cover reconciliation and fraud protection.
Controlled Disbursement
This method is primarily used in cash management to help large companies track and format their payments, thereby gaining from accrued interest. It regulates the flow of checks through the banking system’s day-to-day transactions. It is typically performed early in the day to achieve specific fund management and investment objectives.
A student loan disbursement refers to the distribution of a loan to the student or a financial institution. Loan servicers and schools notify students of the disbursement in writing, including the loan amount and the expected date of disbursement. Private and federal student loans are usually disbursed twice during an academic year. The funds are generally credited to the students’ accounts to cover fees and tuition, and the balance is typically sent via direct deposit, check, or another agreed-upon payment method.
Student loans have specific eligibility requirements that students must meet. A money lender may fail to approve a loan or delay disbursement until the student meets the requirements. Once there is sufficient proof, the lender moves the funds to the student’s account.
In some cases, disbursements may be made through an escrow account. This is where a third party retains the funds until the student meets the requirements for complete disbursement. While waiting for a check disbursement, it is crucial to stay in touch with the other party to ensure you are fully aware of the process and terms of the disbursement.
Other aspects to look out for include the method of payment, the recipient of the funds, the expected disbursement date, whether it’s a check or direct deposit, and any additional steps you need to take before the funds are sent. Transactions are not all the same, and it is essential to understand the details of each transaction.
The Difference Between Disbursements and Expenses
Many people usually use the term disbursement when discussing a company’s expenses. Ordinary business expenses and disbursements are not the same, although you can consider a disbursement a business expense.
A business expense refers to funds spent on operating a business with the aim of increasing profit. This can include purchasing new equipment or supplies, paying employee salaries, or spending money to market the business. On the other hand, a disbursement is money paid on behalf of a person or client by an agent or company. It is an expense to the person paying the money on behalf of another.
Expenses and disbursements are also expressed differently in annual financial reports. Expenses are typically categorized, while disbursements have their own category.
Disbursements also differ from reimbursements in that reimbursements are payments made to cover the original disbursement. For example, if a business makes a disbursement to a client, the client reimburses the business with the original payment. Reimbursements are subject to interest fees or discounts depending on the agreement.
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Last updated: September 2025