Do you know your disbursements? Avoid Cash Leakage!!

by | Legal bookkeeping

Hard Cost

What’s definition of Hard Cost?

Hard Cost (or direct cost) can be identified as any disbursement a firm pays directly to a vendor on behalf of their client. These expenses may include filing fees, legal cost, expert witnesses, the cost of court reporters and various other hard cost paid to third vendor on behalf of the clients. Please note this
list is not comprehensive and there might be other expenses. Basically, any expense paid using firm’s operating account or credit card and a receipt is issued by third party vendor will likely qualify as hard cost.

How to record?

At the time of disbursement, it’s imperative that Hard Cost is linked to the matter for charge back/including in the bill for your client.


Soft Cost

What’s definition of Soft Cost?

Soft Cost (or indirect cost) is identified as an “in-house” expense associated with a client matter. These costs may include (but not limited to), phone service costs, fax (if you still incur these costs), photocopies (for firm’s photocopy machine).

Basically, any expense associated with the general business activity of the law firm – for which a specific % or amount is charged to each client/matter. Normally, for soft cost, there is no third -party invoice or bill associated.

How to record?

Soft costs may be considered income or offset against specific firm expense that is charged to the client.

For more information contact CloudAct* team by email: or Telephone: 416-985-4978. Check us:


*CloudAct CPA Professional Corporation, a Toronto based firm providing taxation, accounting and business advisory services to lawyers and law firms. The generic discussion in this article has been made available for informational and educational purposes only. Talk to a qualified accounting and tax professional to discuss the accounting/tax implication based on your specific circumstances. Accounting standards/Tax laws are complex and are subject to frequent changes. CloudAct CPA Professional Corporation cannot accept any liability for the accounting/tax consequences that may result from acting based on the information contained therein.

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