Most lawyers go to law school because they are interested in practicing law. It is rare that you find a who went to law school because they have a particular affinity for legal accounting. Unfortunately, as a lawyer managing a practice, you must treat your law office accounting as fundamental. The problem is that accounting can be as equally challenging … Read More
Beyond The Basics: Advanced Trust Accounting Challenges for Law Firms
The majority of lawyers know basic trust accounting principles, but throughout the course of business, instances arise that require more in-depth knowledge. Scenarios such as a lawyer leaving the firm and taking their clients with them or the firm needing to switch banks may not be daily occurrences, but it’s still critical that the proper procedures are followed. Going beyond … Read More
As a lawyer, what should I do if I make a trust accounting mistake?
Making a trust accounting mistake can lead to serious repercussions for lawyers, but proper handling is critical in order to avoid sanctions. If there has been a small error, correct the issue as soon as it is noticed. Delays in fixing known errors can be interpreted as failure to properly manage the trust account. For larger concerns, you can reach … Read More
How should I record trust deposits?
No matter what type of accounting your firm uses, trust account deposits should be recorded using the principles of double-entry accounting[1]. In double-entry accounting, each transaction is entered twice: once as a credit and once as a debit. Which accounts the transaction is applied to will be determined by how your firm’s chart of accounts is set up. If you’re … Read More
What are my state's IOLTA rules?
Every state has an IOLTA program, but whether or not it is mandatory varies from state to state[1]. Many of the guidelines for IOLTA accounts are standards set by the American Bar Association and are closely followed by state bar associations. There are differences in each state’s rules and statutes, however, as they are allowed to decide when, how, and … Read More
What are the benefits of having a retainer?
Requiring a retainer for your clients to get a financial commitment on their end presents a number of advantages, including: Maintaining cash flow For law firms, consistent cash flow allows you to plan for covering costs associated with payroll and traditional business expenses such as copiers, leases and equipment. Sending out invoices takes time, but waiting for the payment to … Read More
Does a client trust account need to generate interest?
Certain states require that client funds only be placed in accounts that generate interest[1]. Typically trust accounts, whether IOLTA or individual trust accounts generate interest. The primary difference lies in where the interest goes. With IOLTA accounts, interest goes to a state foundation for the purposes of providing legal aid to those who would not be able to otherwise afford … Read More
How do I set up a trust account?
If you will be handling client funds that need to be kept in a trust account, you want to make sure you set up the account properly. Not only are there numerous regulations as to how the account should be maintained, but there are also rules on what banks can be used and how the accounts should be created. Many … Read More
What client trust funds can be used to pay an invoice?
When you’ve worked on a matter and are billing fees to a client, those fees can then be deducted from the client’s trust account. You can also look to seek payment on an invoice for reimbursement of advanced matter costs. However, it is recommended to have the client view and approve the invoice prior to moving the funds[1]. With trust … Read More
What trust accounting reports should my firm be generating?
Maintaining proper trust accounting records is crucial in order to ensure accurate bookkeeping, provide an audit trail, and clearly establish proper trust account handling to maintain compliance. Also known as IOLTA accounting, managing these specialized client accounts requires diligent reporting. Each state varies in its specific report requirements, but the following are a list of trust account reports that are … Read More