CosmoLex’s built-in trust account management features are a big help to law offices that work on retainer, but there are still some errors you have to be careful to avoid. Attorney trust accounting software works best when used alongside smart account management practices. Here are a few mistakes to look out for.
Taking Money Before It’s Earned – When a client gives you an advance or retainer, that money is not yours until it’s earned. You can’t simply dump it into your operating account and spend it on the assumption that you will earn it later. You have to keep the funds separate until you earn them, and only then can they be transferred into your operating funds.
Not Taking Money After It’s Earned – Not taking retainer funds can be as bad as taking them too early! Even if you’ve earned the funds, retainers still belong to the client until you formally take possession of them. If you don’t then those funds could be seized by other creditors, which is a failure in your duty to protect those funds. This is one reason it is so important that trust software work with your legal billing program so you can easily take retainers as you earn them.
Not Returning Unearned Fees – Once a matter is closed, any remaining retainer amounts should be refunded to the client immediately. It’s easy to forget such a detail or put it off if you are busy. Again it is essential to remember that those funds are not yours, but merely being held by you in the client’s interest. Once the matter is concluded, you are obligated to return the money to the client.
Misappropriation – Very, very few attorneys steal from their clients deliberately but a surprising number do so by accident. What often happens is attorneys lose sight of the day to day operation of the trust account holding the retainer and assume that as long as the account balances each month then everything is fine. In reality you can never “borrow” from a client’s retainer funds to pay another client’s fees or pay your own operating expenses. Even if you are paying a client expense, the best practice is to transfer the money from the trust account to your operating account and then pay the expense from the operating account.
Trust account management doesn’t have to be complicated when you use the trust fund software included in CosmoLex. Protect your practice from trust fund mistakes; subscribe to CosmoLex today.