When someone other than the client pays the fee note
How a law practice records a payment from an insurer, employer or other third party towards a client's fee account, from bank line to statement.
By Achekam · · 5 min read · For Legal businesses in South Africa, Nigeria, Kenya
The client is a company director facing a disciplinary inquiry, and the company has agreed to pay his legal costs. Another client's legal expenses insurer pays fees up to its policy limit. A mother pays for her son's criminal defence. A trade union pays for a member's unfair dismissal claim. In each case the money arrives from someone the practice did not invoice, with a reference that may or may not mention the client.
These payments are easy to mishandle. The receipt sits unidentified for weeks, or it is matched in the bank reconciliation and nobody records it on the fee note, so the client is chased for money that has already been paid. This article explains how a law practice in South Africa, Nigeria or Kenya can record third-party payments in Achekam so the client's account is right and the payer's role is on the record.
Who pays, and whose account the payment belongs to
Settle one question at the start of the matter, in the mandate: who is the practice's debtor? Usually it is the client. The fee notes are addressed to the client, the client is liable for them, and the third party pays towards the client's account on the client's behalf. If the payer stops paying, the balance remains the client's.
Sometimes a practice agrees to invoice the third party directly, for example an insurer that requires fee notes in its own name. Then the insurer is the customer for those fee notes, and the client's account shows only what the client owes. Either approach works; mixing them on one matter causes confusion.
| Arrangement | Fee notes addressed to | Who is chased if unpaid |
|---|---|---|
| Third party pays on the client's behalf | The client | The client |
| Practice invoices the third party | The third party | The third party, under its agreement |
| Third party pays up to a limit | The client, with the limit noted | The third party up to the limit, the client for the rest |
Know your payer, too. In South Africa, the Financial Intelligence Centre's page on legal practitioners explains which attorneys and law firms are accountable institutions under the FIC Act and the compliance obligations that apply. A payment from an unexpected third party is precisely the kind of thing those obligations ask a practice to look at before accepting it. Nigerian and Kenyan practices have their own anti-money-laundering rules to apply.
Finding and matching the transfer on the bank statement
A business imports bank statements as PDF, CSV, Excel, OFX, QIF, MT940 or CAMT.053, and each import is checked so that the opening balance plus movements equals the closing balance. Third-party payments then appear as bank lines with the payer's name, not the client's.
Bank lines are matched by suggestion and a person accepts each match. A line not yet in the books becomes a suggested journal a person approves, and a reconciliation completes only when nothing is left unexplained. The person reconciling needs to know which payers are paying for which clients, so keep a short list of third-party payment arrangements, matter by matter, beside the reconciliation.
If you ask payers to pay through the pay page, it can show the practice's bank details and a payment reference, and a staff member marks the payment received once it shows on the bank statement. Giving the payer the client's fee note reference to quote makes identification far easier.
Recording the receipt against the client's fee note as well
This is the step that is most often missed. Matching a bank receipt to a customer invoice does not record the payment on the invoice; it must also be recorded in receivables. A matched bank line alone leaves the fee note showing as unpaid.
So every third-party payment needs two actions:
- In the bank reconciliation, accept the match for the bank line.
- In receivables, record the receipt against the client's fee note, with the payer's name in the reference.
Payments can be recorded against one fee note or spread across a client's fee notes. Where one payer settles fee notes for several clients in a single transfer, such as an insurer paying a batch of claims, split the receipt across the relevant fee notes; one payment covering many invoices shows how.
Part payments and the balance the client still owes
Third parties often pay less than the full fee note: an insurer pays up to its tariff, an employer caps its contribution. A part payment leaves the fee note part-paid, and any extra is held on the client's account.
When a payer short-pays, tell the client promptly, in writing, what was paid, by whom and what remains. A client who believed their insurer was covering everything should not discover the shortfall from a reminder months later. A receipt can be re-allocated if it was recorded against the wrong fee note.
Statements that show the client what was paid on their behalf
The server produces a customer statement of account as a PDF that can be e-mailed, and the screen says whether it was sent. Send the client a statement after each significant third-party payment. It shows the fee notes, the payments received against them and the balance, so the client can see that the payer's money reached their account.
At the end of the matter, the statement is also the closing record; settling the account before closing the file is covered in settling the client's account when a matter closes.
Keeping the payer's remittance advice with the matter
Insurers and employers usually send a remittance advice or a letter explaining what they paid and why. File it in the matter's folder in Document Centre, the folder-based store where a business uploads, tags and searches files, with a tag such as "third-party payment". If the payer later asks for a refund, or the client disputes what was covered, the remittance advice and the receipt are side by side.
Review your open matters this week, list every third party that pays fees, and check that each payment received so far is recorded against the right fee note, not just matched at the bank.
General guidance only, not advice on your own circumstances. Tax and payroll rules change: check the current position with the authority or your adviser.
