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 do I do with unclaimed trust accounting funds if I can’t locate my client?
Lawyers are supposed to act as fiduciaries of client funds, acting in their best interests and protecting their assets. If you are seeing uncleared checks on reconciliations for more than a month or two, you have a duty to look into the funds and try to get them to your client. Additionally, funds may be lingering in trust accounts are … Read More
Can I use a general accounting program like QuickBooks for Legal Trust Accounting?
General accounting programs can be used to track trust accounts but be aware that they have three major deficits when it comes to legal trust accounting: they require significant customization, they lack necessary safeguards, and their reporting functions are inadequate.[1] Customization Client trust funds have to be recorded on your law firm’s books as a deposit into a bank account … Read More
What is a three-way reconciliation?
Everyone who has balanced a checkbook knows how to perform a two-way reconciliation – you verify that the balance shown on your bank statement, when adjusted for uncleared deposits and withdrawals, matches the balance shown in your books or checkbook.[1] Once you have performed a two-way the reconciliation on the trust account, however, you have to perform a third reconciliation … Read More
Why should I use a specialized legal accounting program?
A law firm is like any other business in that it must have a system for recording its financial transactions in order to generate the reports that the owners and officers can use to evaluate the company’s financial health. General accounting programs meet most companies’ needs because they allow the business to record financial transactions and generate the , profit … Read More
Why do I need to do a three-way reconciliation of each trust account?
If you practice in Canada, then you are required to perform a three-way reconciliation of individual and pooled trust accounts on a monthly basis.[1] In the United States, as of May 2019, 26 states (AL, AZ, IL, IA, MA, MO, NJ, SC, CA, CT, FL, HI, LA, MD, MS, MT, NH, NM, NC, OH, PA, TN, VT, WA, WI, WY) require … Read More
How is law firm accounting different from other types of business accounting?
Law firms, like all businesses, need to produce in order to evaluate their operations, financial position, and cash flows.[1] All general and many legal-specific accounting programs can produce these statements provided the business enters all financial transactions into the software. Because law firms receive retainers and advanced fee deposits from clients and must hold these funds in trust until earned, … Read More
What steps should I take when recording a client payment?
The steps your law firm should take when it receives a client payment depends on the bar rules of the jurisdictions where you practice. Some states allow attorneys to place client overpayments in the attorney’s operating account and track the overpayment as an operating retainer. But in many jurisdictions, when a client overpays on an invoice, the attorney must either … Read More
What do I do when a client fails to deposit a trust refund check?
When a client fails to deposit a trust refund check, you should make reasonable efforts to verify any changes to the client’s address.[1] If you are unable to locate the client, check with your state or local bar association to see what your next steps should be. The bar rules may require you to wait an additional period of time … Read More
After making a deposit to trust, how long do I have to wait before I disburse funds?
Most state and local bar rules require attorneys to make sure that a settlement check deposited into a client trust account has cleared the bank prior to disbursing any funds.[1] Many attorneys disburse funds from trust accounts as soon as they become available because they confuse availability of funds with the check clearing (a check clears when the money from the … Read More