In the management of a company’s utility supplies, not all the amounts shown on an invoice represent a real expense. This nuance, which may seem minor, has a direct impact on accounting, taxation and the overall profitability of the business.

Although the concept applies to different contexts, the water bill is one of the clearest examples for understanding what a disbursement is, how to identify it and why it is important to manage it correctly, especially in companies with multiple assets or locations.

What is a disbursement?

A disbursement is an amount that a company pays on behalf of a third party and subsequently recharges at the same value, without applying any margin or profit.

From an accounting and tax perspective, a disbursement:

• Is not income for the company
• Is not part of the taxable base
• Should not be subject to VAT, provided it is invoiced correctly
• Must be clearly identified as such

In this type of transaction, the company acts solely as a payment intermediary, not as the final consumer of the service.

‍Why does the concept of disbursement cause confusion?

In practice, disbursements often cause confusion because, at first glance, they appear to be just another expense item on the invoice. This usually happens for two main reasons.

First, disbursements are often integrated into the same invoice together with other items billed directly by the supplier, without a clear visual separation.

Second, invoices do not usually explicitly identify these amounts as “disbursements”. Instead, their nature must be inferred because the charge is issued in the name of a third party rather than the main service provider.

A very common example of this type of confusion can be found on water bills, where items such as fees, levies or sanitation charges are often considered disbursements, even though they are not always explicitly labelled as such.

The water bill as an example of a disbursement

The water bill is a particularly representative case for understanding how disbursements work in practice.

Example I - Typical Case:

In a quarterly water bill, it is common to find different items such as the service charge, tiered consumption charges, meter maintenance, and the sanitation levy.

• The service charge, consumption, and meter maintenance are amounts billed directly by the water supply company.
• The sanitation levy, however, is an amount paid to the Generalitat Valenciana (the regional government of Valencia), although it is collected through the water bill. In other words, the customer does not pay it directly to the public administration; instead, the water supplier acts as an intermediary.

This levy is a clear example of a disbursement (known in Spanish as suplido), since the provider simply passes on to the customer an amount that actually corresponds to a third party. A key indicator is that it is not subject to VAT, as disbursements generally do not form part of the taxable base. In addition, the invoice must clearly identify the entity to which the amount is paid, since the supplier is acting solely as a payment intermediary.

Understanding this distinction is essential for correctly interpreting the invoice and for proper tax and accounting management of utility expenses.

Example II: “Other environmental services” case

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In some water bills, especially in large cities or metropolitan areas, items appear grouped under headings such as “Other environmental services”. This block is a clear example of disbursements, as it includes charges that do not correspond directly to the water supply company, but to various public entities.

In this case, all of these amounts are considered disbursements, since the company managing the invoice acts solely as a payment intermediary.

Within the “Other environmental services” category, you may find, for example:

• Sewerage, a charge issued by Valencia City Council
• Wastewater treatment, a charge issued by EPSAR (Public Entity for Wastewater Sanitation of the Valencian Community)
• Waste treatment, a charge issued by EMTRE (Metropolitan Entity for Waste Treatment)
• Júcar–Turia regulation levy, a charge issued by the Júcar Hydrographic Confederation

Although all these amounts appear grouped on a single invoice, each one corresponds to a different issuing entity and to a specific service linked to the integral water cycle.

How can disbursements be identified?

These charges meet all the conditions required to be considered disbursements:

• They are not services provided by the water supply company
• They correspond to public fees and levies
• They are recharged at the exact amount, with no margin
• The company paying the invoice is not the final beneficiary of the service

In addition, on the invoice itself:

• They are not subject to VAT
• Each issuing entity identifies its own tax ID (NIF)
• The items are clearly differentiated, even if they share the same invoice number

This last point is particularly relevant, as it shows that a single document may include several disbursements, even when payment is made in a consolidated way.

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Important note on identifying disbursements

Not all charges issued by another entity are necessarily disbursements. If an item, even if it comes from a third party, appears under a different invoice number, it is considered a separate transaction and must be accounted for independently.

This means that, in order to correctly identify a disbursement, in addition to reviewing the tax ID, VAT and description, you must also check whether it shares the same invoice number as the supplier’s own services.

Example of independent accounting

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Which items on a water bill can be considered disbursements?

A water bill usually includes different items. Identifying them correctly is key.

Items that may be considered disbursements

• Regional taxes and levies: water levy, sanitation levy, wastewater treatment levy or hydraulic levy.
• Municipal fees: sewerage, municipal sanitation, municipal wastewater treatment, discharge fees, waste collection or treatment fees.
• Charges from specific public entities: wastewater treatment, waste treatment, environmental services, among others.

These amounts can be treated as disbursements provided they are issued by a third party, are not subject to VAT and do not correspond to services directly supplied by the main service provider.

Why is it important to account for disbursements correctly?

Poor management of disbursements on invoices can generate several problems, especially when the volume of invoices is high.

Main risks

❌ Tax errors
❌ Incorrect taxable bases
❌ Distorted profitability
❌ Lack of cost control
❌ Risks during audits or inspections

The real challenge: volume and complexity

When a company manages dozens or hundreds of water bills:

• Formats change
• Items are not always clearly defined
• Traceability is lost
• Manual control becomes unviable

Manually distinguishing disbursements from own expenses not only consumes time, but also increases the risk of costly errors and delays decision-making.

How Polaroo transforms the management of disbursements

With Polaroo, identifying and managing disbursements stops being a manual task and becomes an automatic, reliable and fast process:

• Our AI automatically detects disbursements on your invoices, separating them from own expenses and saving time on data reviews
• Hours of repetitive work and VAT accounting errors are eliminated
• It allows consumption analysis by asset, site or customer, improving control and transparency
• Operational times — and therefore costs associated with errors or manual reviews — are reduced

Real business case

In 2025, 6% of all water bills managed for our clients corresponded to disbursements. Polaroo detected them automatically, without any manual intervention, ensuring that no tax or accounting errors went unnoticed.

Companies that do not use Polaroo are incurring hidden costs and significant time losses:

• VAT errors that may lead to penalties or tax adjustments
• Accounting hours wasted on manual reconciliations
• Strategic decisions based on incomplete or incorrect information

💡 In other words: every invoice that is not processed with automation represents lost time and money. Polaroo turns a manual, error-prone process into a 100% automated, reliable and traceable workflow, reducing operational costs and tax risks.

‍Conclusion

A disbursement is not a minor detail or a mere accounting technicality: it is a key element in ensuring correct tax, accounting and financial management. The water bill is one of the most common — and at the same time most complex — examples of how a single document can include both real expenses and amounts that the company only advances on behalf of third parties.

• Avoid tax errors
• Improve transparency
• Gain better cost control
• Professionalise utility management

In companies with multiple assets or locations, where invoice volume and the diversity of items multiply, this distinction stops being operational and becomes strategic. Without structured data and proper traceability, disbursements are diluted within expenses, leading to inefficiencies and decisions based on incomplete information.

For this reason, professionalising the management of disbursements — especially in utilities such as water — not only improves regulatory compliance, but also provides control, clarity and analytical capability. In this context, having technological tools that automate the identification and treatment of these items makes a real difference in cost management and in the quality of financial information.