While your legal practice management software keeps the daily work of a law firm moving, legal CRM software makes it easier to bring in new clients, engage current clients, and increase your profits. But not all legal CRMs are created equal. Look for these six features when choosing a legal CRM—and put them to work for your law firm.
Implementing key accounting strategies can safeguard client funds, protect your firm’s reputation, and future-proof your business. These proactive measures will keep your practice in good standing and provide peace of mind for your firm and clients.
Knowing what your local jurisdiction requires will help you proactively manage client funds and prevent issues before they happen. Determine if there are specific steps your firm must take to prevent the commingling of funds.
Managing client funds effectively starts with separating client trust accounts from the firm’s operating accounts. This means maintaining distinct accounts and ensuring that each client’s funds are tracked individually within those trust accounts.
By managing single-client ledgers or multiple trust accounts, you create a clear boundary that helps prevent the inadvertent use of one client’s funds to pay another client’s obligations or firm expenses.
It’s also essential to maintain separate ledgers for trust and operating accounts and to diligently record all transactions associated with the trust account. Detailed record-keeping helps avoid common trust accounting mistakes, such as ledger overdrafts or accidental commingling.
Trust accounting software can help you stay on top of your financial management. CosmoLex’s Trust Accounting solution automatically does all your law firm’s trust bookkeeping in the background and in real time.
Robust record-keeping is a cornerstone of ethical and compliant trust accounting. Most jurisdictions mandate that law firms maintain comprehensive records of all client fund transactions and preserve these records for a specific time. This includes documentation of deposits, withdrawals, and transfers involving trust accounts.
Maintaining a separate trust account for each client simplifies the management of payments and serves as a protective measure against accidental commingling. The prompt recording of all transactions as they occur is essential—delays or omissions can lead to discrepancies that may be difficult to resolve later.
Legal practice management tools like CosmoLex can streamline this process, making it easier to keep accurate, up-to-date records and reduce the risk of errors.
By regularly reconciling your bank accounts and conducting trust audits, you’ll catch any mistakes that may have occurred, such as keying or bank errors. Having one program to manage your retainers (for billing purposes) and your reconciliation (for accounting purposes) is helpful and keeps things streamlined. Without reconciliation, you risk not catching inaccuracies before they escalate.
One of the most proactive ways to prevent commingling funds is to train your staff on ethical and legal requirements. Everyone in the firm who interacts with financial transactions, from paralegals to administrative assistants, must be well-versed in trust account management procedures. This includes understanding the importance of keeping client funds separate, knowing how to record transactions correctly, and being aware of the risk of commingling.
Regular training sessions and updates on any changes to state and local bar rules can keep your team informed and compliant. Providing staff access to the right tools can help them easily and consistently adhere to best practices. Clear protocols and ongoing education will minimize the risk of errors and help maintain the integrity of your firm’s financial practices.
One of the key aspects of preventing commingling is the appropriate management of client fees. It’s imperative to promptly transfer earned fees and cost reimbursements from the client’s trust account to the firm’s operating account. This helps maintain a clear distinction between client funds and firm revenues. Flat fees earned upon receipt should also be deposited directly into the firm’s operating account rather than the trust account to avoid unnecessary complications.
When disbursing funds from a client’s trust account, make sure the funds being disbursed have cleared the bank, especially if they originate from a recent deposit. This helps prevent overdrawing accounts and the legal issues that could arise from it.
By carefully managing client fees, your firm can significantly reduce the risk of commingling and its consequences.
Maintaining the highest ethical standards in handling client funds is non-negotiable. By understanding and implementing these strategies, your firm can mitigate the risk of commingling funds, stay compliant, and protect your reputation with clients.
Keeping your law firm on the right side of ethical and legal guidelines can be daunting. With CosmoLex’s comprehensive law practice management software, you can streamline your accounting processes and automate critical tasks to ensure accuracy and compliance.
From automated compliance checks to real-time financial oversight, CosmoLex takes the burden off your team, allowing you to confidently manage ledgers and accounts, protect client funds, and build long-term loyalty.
Investing in the right tools can take your firm to the next level. Try CosmoLex for free today and experience how seamless legal accounting can be.
While your legal practice management software keeps the daily work of a law firm moving, legal CRM software makes it easier to bring in new clients, engage current clients, and increase your profits. But not all legal CRMs are created equal. Look for these six features when choosing a legal CRM—and put them to work for your law firm.
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