In general, deposit only these client funds into a trust account:
Remember, any funds for which you have fiduciary responsibility should always be held in separate properly entitled accounts.
Client A’s money has nothing to do with Client B’s money. Even when you keep funds in a pooled client trust bank account, each client’s funds are completely separate entities which means a separate balance and transaction report for each client must be maintained at ALL times.
If there is an instance where you unintentionally spend more than a client has on deposit, the overdraft amount must be paid back from your personal funds.
Don’t disburse until the deposited funds have cleared the trust account. Be diligent, but don’t let a client rush you. After you have written the trust check(s), take a moment to add them up and reconcile the client’s account.
You must keep a record showing that you reconciled or balanced each trust bank account every month. The balance in the bank must agree with the total of the client balance listed on your books. Most trust account mistakes are identified during reconciliation. Firms that do not reconcile monthly are waiting for disaster to strike.
Manual trust management is simply not good enough anymore. Arm yourself with specialized IOLTA software, preferably a package that is integrated with your time and billing software so they can work together. Many firms prefer cloud-based trust accounting software because of more flexible access and easier backups.
Keep Paper Records In Addition To Bank Statements
Even if you use trust accounting software, you might want to establish a good audit (paper) trail. In addition to the bank account statement and any canceled checks, keep a monthly folder with the following:
Each state has its own set of rules and regulations for client trust account management. Always keep a current Rule Book in your office and consult it as your first source of information.
Don’t lose sleep over trust fund accounting. Follow these simple rules and you’ll always be prepared for an audit.
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