It’s important to understand disbursements because they’re a key element of cash flow, which is crucial to monitoring the success of a business. Companies that are disbursing more money than they’re receiving are often at risk of failure; businesses that take in more funds than they’re disbursing are often considered successful.
Disbursement methods
Disbursing money means transferring it from one account to another. Some disbursements, such as lease payments and other bills, can be made automatically, with a specific amount disbursed on a specific date. Other disbursements, generally one-time or variable payments, are made within a set period of receiving an invoice or a bill.
For most entities, disbursements are made via the electronic transfer of funds from one bank account to another. That’s not the only way to disburse money, though. Disbursements can be made from credit or debit cards, using wire transfers, via paper checks, or even paid with cold, hard cash.
Disbursements may differ from payments. A disbursement is always a form of payment, but a payment may not be a disbursement if it’s made with funds not owned by the company or person making the payment. Payments may also be made from a source other than a larger account; a disbursement will almost always come from an account.
