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The Challenges Of Monthly Trust Account Reconciliation

Reconciliation ensures your own records match the bank’s actual balance. It is a chance to identify banking or bookkeeping mistakes. Although tedious, in many cases it’s only during the monthly reconciliation process that mistakes are discovered. It is MUCH easier to review these records monthly and catch errors that have occurred in the past 30 days than it is to have to go back through several months’ worth of records to find the mistake.

Although it’s important to keep on top of reconciliation, it can easily get pushed to the bottom of an attorney’s To-Do list. A strong, easy-to-follow process is your best assurance that this critical aspect of trust account management is completed every month.

Monthly Reconciliation Best Practices

Proper management of trust accounts is essential. Not only will it keep you in compliance and maintain accuracy of the accounts, it protects you against accusations of fraud, theft or mishandling of funds. Adopting and maintaining monthly reconciliation procedures can help make the process more manageable and more accurate.

A strong monthly reconciliation process includes:

  • Full and complete adherence to the process by all employees who are responsible for trust funds.
  • Daily reconciliation of receipts and disbursements of the trust account.
  • 3-way monthly reconciliation of all trust accounts upon receipt of the bank statement.
  • A segregation of reconciliation duties. It is very important to have segregation between who signs on the account, who prepares the reconciliation, and who reviews it. Someone who handles the funds and writes checks or makes deposits should not be the same person performing the reconciliation.
  • Reconciliation results are readily available for viewing by senior management and the firm’s accountants, accounting consultants, or the client.

3-Way Reconciliation

The more trust accounts you manage, the more complex the reconciliation. Best practices encourage 3-Way Reconciliation no matter how many trust accounts are involved, but that’s a time-consuming process if you’re doing it all with paper ledgers. In 3-Way Reconciliation you’ll need to reconcile:

  1. Each individual client’s trust activity.
  2. The whole of the trust account.
  3. The bank statement.

Then, you’ll need to make sure all three of these individual records balance every month.

Simplify The Reconciliation Process With CosmoLex’s Legal Trust Accounting Software

Depending on the number of accounts you manage and how much activity they see, trust accounting can become extremely time-consuming, not to mention prone to errors as fatigue takes over or the process is rushed. CosmoLex’s integrated legal trust accounting software eliminates this risk. Our error-proof reconciliation process is no more complicated than checking items off a list. You are able to manage multiple accounts from one screen and, with one click, run 3-way reconciliation reports. Any trust accounting need is met through our software with built-in safeguards protecting you from the most common trust accounting mistakes.

Learn more about our practice management software with integrated trust accounting for attorneys.


Rick Kabra

Dr. Rick Kabra is President of CosmoLex Cloud, creator of cutting-edge technology solutions to help solo and small law firms law firms. Rick has a Ph.D. in Electrical Engineering from NJIT and has over 13 years of experience in the legal software industry catering to the specialized technology needs of small to mid-sized law firms. Rick has given numerous seminars and published articles on legal technologies such as law practice technology management, cloud computing, and legal billing, business & trust accounting compliance.