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How to clear Future Disbursements from a Bill

A common problem Millennium users ask us about is the correct method to clear off disbursements billed and not yet paid (future disbursements) when the anticipated disbursement was never actually paid out. This is often discovered when the matter is about to be closed, and the Bill has already been paid by the client, but the Bill still has a value showing against the Disbursements Billed and Not Yet Paid balance.

There are two methods you can use to clear off the Future Disbursement from the Bill.

  1. Post a Fee Credit for just the Future Disbursement.
  2. Post a disbursement against the bill, then cancel the disbursement.

The actual procedure for each of these methods is described below.

Example:

The following screen shot shows the starting point for this posting example. The ledger card has a single disbursement, and a bill (which includes some time worked and miscellaneous fee charges totalling £730.80 + VAT), and a value of £38.00 for a disbursement which is expected to be paid out soon.

Full payment of the bill has also been received at this point, for which the program gave us a warning (as required by the Law Society rules) that the office account would go into credit, but since we expect a future disbursement to be paid out of office within 7 days we allowed this. Also note the lower case “a” and “p” cash allocation Status markers indicating the disbursement totals have not been fully allocated/paid for the bill.

Bill Detail:

A useful feature that users may not be aware of is the ability to see very specific details of any type of transaction on the ledger card, either by double-clicking the line you want to see the detail for, or by selecting the line then click the View button.

So to view the detail for the Bill transaction, highlight the FE-PY line, then click View to open the first Detail screen, then click the More Detail button to show the following full details screen:-

The middle section shows that all items of the bill have been paid, except for the Disbs.billed & not paid (future disbursements). Click the tab also labelled Disbs.billed & not paid in the lower section of the screen to view the description entered for the future disbursement at the time of posting the bill and the status of it – in this case £38.00 is the Amount outstanding.


Method 1 – Fee Credit (of Future Disbursement only)

A fee credit can be posted to contra just the future disbursement value. This can be done either;

a)      before payment of the bill has been received

b)      after payment of the bill has been received (obviously the client has already been billed and paid up, so you will need to give them a refund to the value of the overpaid disbursement).

When cancelling future disbursements on a bill that has not yet been paid for by the client it is important to clear out the contra value to any items that you do not want to cancel, e.g. time worked, miscellaneous fee charges, and disbursements already paid. The following screens demonstrate this.

Method 1a) Fee Credit (before payment of bill has been received)

Start by entering Bill Posting, enter the matter number and click Credit Note.

Click Next.

Above: Tick the “Correct/cancel an existing bill or proforma” bullet, and from the bills shown select the bill containing the future disbursement value, then click Next.

Above: The detail has defaulted to “Reverse future disbursement”, and the Billed Time Value of £675.00 appears in the Fee (excl.VAT) box. Make sure you zero this value before tabbing out of this field, and the VAT amount will then zero also. Failure to do so will cancel the main bill value.

Click Next.

Above: If any miscellaneous fee charges are on the bill these will show up on this screen. Make sure you click the –Remove button for any charges to prevent these charges being cancelled off the bill.

Click Next.

Above: This screen shows any Disbursements already paid from the ledger card, that have been included in this bill. Make sure you click each disbursement line and click Detach to “un-tick” them, because you do not want them to be “detached” from the bill.

Click Next.

Above: Now we’ve reached the screen with the future disbursements value. If there is more than one future disbursement then you can leave them showing (they will be cancelled) or click the “–Remove” button to remove future disbursements that you do not want cancelling. Basically any future disbursements that remain showing on this screen will be cleared off the Bill. Notice that you cannot click the +Add button (its greyed out) because we are doing a fee credit.

Click Next.

Above: The summary screen shows the final bill total. The Bill Total showing here should now be just the value of the future disbursements that you want to cancel. If it is not then it suggests that you will contra more than you mean to, so use the Back button to review what you entered and correct any items you overlooked or should have removed or zeroed. If all seems well, click Post.

The Ledger Card now looks like this, showing the Fee Credit applied before the Bill was paid by the client:-

And the More Detail screen shows that the future disbursement value (“Disbs. Billed & not paid”) are now zero, and the Disbs. Billed & not paid tab shows £38.00 under the Amount cancelled column:-

Method 1b) Fee Credit (after payment of bill)

Start by entering Bill Posting, enter the matter number and click Credit Note.

The process is very similar to the Method 1a detailed above, except that since all the other items of the bill have been paid by the client, the fee credit posting screens are much simplified, and only the Future Disbursements screen will show (because it’s the only thing outstanding on the bill).

After the fee credit for the future disbursement only is posted the ledger card looks like this (note that the office balance is in credit due to the overcharged bill, and a repayment should be made to the client, either directly from office account, or by transfer to the client current account). Also note the “PC” status against the bill which indicates some disbursements were Paid and some Cancelled:-

The More Detail screen shows that the future disbursement has been cancelled.

This achieves the desired result because first the future disbursement value on the Bill (Disbs billed & not Paid) is allocated to the disbursement, then when the cancelling receipt is posted it is the disbursement value on the bill that gets corrected because the value has now been converted from a “future” and allocated to an “actual” disbursement, i.e. the future disbursements value remains at zero. This becomes clearer when you look at the More Detail screen for the bill after the Method 2 transactions have been posted.

Note: You might be tempted to refund the overpayment back to the client by posting a correcting payment (Cash Correction for £38.00) allocated against the receipt of money that paid the bill in the first place. This is incorrect because the Disbs billed & not Paid value would be unaffected and would still appear against the Bill.

Method 2 – Step 1: Posting the disbursement

Start the Office Account Posting wizard and select the matter to which this applies. As this is a correctional type posting you may prefer to use a suspense office account bank so that the normal office bank is unaffected by the transactions. Select Payment as for a normal disbursement:-

Click Next.

Above: Select the Disbursement tab and click the Billed Disbursement bullet, then select the Bill containing the Disbursements Billed and Not Yet Paid value that you want to clear off. The value of the Future Disbursements can be seen on the bill line (our example is £38.00). You can also click the View button if you wish to see more details for the selected bill. Click Next.

Above: You will now see the Description and Amount (and any VAT) of the future disbursements expected and entered when the Bill was originally posted. If more than one shows, select the line you wish to cancel. Click the Next button.

Above: Enter details for the bank payment method such as “Cash” since this is only a correcting transaction. Click Next.

Above: Enter any additional payment details, description, etc. associated with the posting, e.g. “Cancelling unpaid futures”. Click Next

Above: Finally confirm the posting by clicking Post.

Now the ledger card appears as shown below. Compare this with the ledger card shown at the very beginning of this document. You will see that the Disbs. Billed & not Paid line has now disappeared from the bill, and the dummy payment we have used to cancel the future disbursement is marked as billed status - “B”.


Now click the View button, then More Detail button to see the full detail for the Bill:-

Above: Compare this with the “More Detail” screen at the very beginning of this document. The row showing Disbs Billed & not Paid has gone, and also the Disbs billed & not Paid tab is no longer available for selection in the bottom section of the screen. Instead the future is now classed as a disbursement and is recorded in the Disbursements tab with an Amount Outstanding of £38.00.


Method 2 – Step 2: Cancelling the Disbursement

So far we have cleared off the future disbursement value from the bill. But because the disbursement used to do this is not real we now need to cancel the disbursement.

Start the Office Account Posting wizard again and select the same matter to which this applies. Use the same bank account  as you used for the Step 1 posting. Select Receipt as the transaction type:-

Click Next.

Above: Allocate the receipt against the Bill by entering the amount of the cancellation (e.g. our example is £38.00), then select the required bill and click the Pay button. Note: Do not tick the “Pay for future disbursements” tick box. This is only used when making a decision to use a receipt to pay for future disbursements outstanding on the bill and we know the disbursements will be paid out in the next 7 days, whereas we have just cancelled the future disbursements because we know they have not been and never will be paid out.

Click Next.

Above: Enter the description for the posting, then click Next.

Above: Choose a suitable posting receipt method, Cash should suffice since this is simply a correction. Click Next.

Above: Finally confirm the posting by clicking Post. You may get a warning (as per Law Society rules) that the office account will go into credit, this will be alright provided you make a corresponding refund to the client.

After this posting the ledger appears as follows:-

Note that the status of all elements of the Bill now appears as fully paid (capital “P”), and the dummy disbursement and correcting receipt are Billed and Allocated status.

Above: The “More Detail” screen for the bill now confirms that everything is fully paid (the dummy disbursement transaction in the Disbursements tab no longer has an Amount outstanding – the £38.00 now shows under the Amount paid column.

Finishing Off

All that remains is to decide how you are going to deal with the credit on the matters Office account. This will generally take the form of a payment to the client direct from Office account, or by means of a transfer from Office to Client Current account. This can be allocated against the original receipt that was used to pay the Bill (marked with a part-allocated status, lower case “a”).

Working preferences

The method you choose to use depends on the way you prefer to work and what you feel is clearer on the ledger card. While a Fee Credit is probably the shorter route, posting the dummy Disbursement and Receipt makes it more obvious (by means of suitable description) what the disbursement was supposed to be, and that it was cancelled.

Reports

There are two reports that you can use to find matters that have future disbursements:-

  1. Disbursements Paid by Client but Unpaid by Firm

Access this report from the Matter, General reports menu. This report is the more important of the two because disbursements paid by the client should be paid by the firm within 14 days to comply with the Law Society legal accounting rules. The report shows disbursements that the client has paid but the firm has not paid out.  These are:

·        Bills that have future disbursements on them where the bill has been paid including the future part.

·        Bills that have disbursements on them that balance against a counsel ledger account where the counsel invoice has not been paid and where the bill has been paid including the counsel disbursement part.

·        Unbilled disbursements that balance against a counsel ledger account where the counsel invoice has not been paid and where the disbursement has been directly paid.

  1. Disbursements Paid by Client but Unpaid by Firm

Access this report from the Matter, Review reports menu. This report shows the amount of disbursements billed but not yet paid out. These are:

·        Bills that have future disbursements on them.

·        Bills that have disbursements on them that balance against a counsel ledger account where the counsel invoice has not been paid.

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