To disburse money means to pay out funds, typically from a specific account, dedicated fund, or public source. It represents the act of making a payment, leading to a reduction in the payer's cash reserves.
Understanding the Act of Disbursement
Disbursement is fundamentally an outflow of cash. While the term can broadly apply to any payment, it often carries specific connotations:
- Payment from Specific Funds: It frequently refers to money paid out from a designated fund, such as government allocations, trust funds, or specific project budgets.
- Third-Party Payments on Behalf of Another: In professional contexts, like legal or consulting services, it often describes payments made by a firm to a third party (e.g., court fees, travel expenses, expert witness fees) on behalf of a client. In such cases, the firm typically expects reimbursement from the client later.
- Cash Outflow: Regardless of the context, a disbursement always results in a decrease in the payer's cash balance, as funds are transferred to another entity or individual.
Common Examples of Money Disbursement
Disbursement occurs in various financial scenarios, illustrating the transfer of funds from one party to another:
- Government Benefits: A government agency disbursing social security payments, unemployment benefits, or disaster relief funds to eligible individuals.
- Business Expenses: A company disbursing payments to suppliers for goods or services, or paying salaries to employees.
- Legal & Professional Fees: A law firm disbursing funds to cover court filing fees, search fees, or expert witness charges for their clients. These costs are later billed back to the client.
- Loan Payouts: A bank disbursing loan funds to a borrower's account after loan approval.
- Investment Distributions: A mutual fund disbursing dividends or capital gains to its shareholders.
Understanding the term "disburse" helps clarify financial transactions where specific funds are intentionally paid out, often for a designated purpose or on behalf of another party. For more detailed information on disbursements, you can refer to resources like Investopedia's definition of disbursement.
