My Top 5 Tips for solving the Rubik’s Cube that is Trust Accounting

Can trust accounting be a Rubik's cube? Yes, It can. And what I mean by a Rubik's cube is that it's a puzzle. I can tell you I have met with enough clients over the years to know that they come to me and they know their IOLTA or trust account is not in balance. Sometimes they say it is balanced because they reconciled it, but they are unaware that just because it balances in QuickBooks does not mean it's balanced three ways.

You need to ensure that the total number of individual accounts and balances in the legal tech software equals the total in the trust bank. That's a three-way reconciliation.

What are some of the ways that trip or unbalance your trust account? Here are a few:

1. A check order that has been debited out of the trust bank account. Similarly, debited wire or merchant fees from the trust bank account in error. Note: Merchant fees deducted from the trust bank account never have to happen. If you're using a proper workflow, using a merchant services provider like Gravity Legal, you won't see the merchant service fees coming out of the wrong bank account. You set this up so that the merchant fees come out of the operating account. Same for wire fees. Talk to your bank. Wire fees should never come out of the trust bank account. If they do, they need to be reimbursed.
2. An amount is entered as a transaction in your legal software, like LeanLaw and Clio. However, a different amount is transferred from the bank account. Mistakes happen, and this is one where maybe the attorney is rushing or the person making the transfer transposes the number. Errors in transferring are why you must stay on top of the IOLTA, which is an essential monthly task.
3. There are missing transactions in the legal tech software. Attorneys get busy. Sometimes we rush through transactions, and things are missed. We may enter an invoice that we intend on recording a payment and then transferring the money, but the recording of the payment doesn't happen. In this case, I will see the transaction land in the bank feed in QuickBooks, but there's no corresponding match.

Skipping out on legal tech software is probably one of the significant examples where we see messy books. Clients like to save a few pennies by not paying for LeanLaw or Clio only to discover that you can do much work around but are you saving money with workarounds? Yes, we see there are mistakes because one or two of the seven workaround steps are missed. Paying for the legal tech software will save you time and save money.

Your trust accounting doesn't need to be a Rubik's cube. Lawyers work hard at doing their legal work and hiring the right accounting professional will help ensure that your accounts stay in tiptop shape. Why not take that burden off your shoulders, if you're doing the bookkeeping work yourself and hire a legal bookkeeper that knows trust accounting? We're just a phone call away.