Legal trust accounting software you can rely on

Trust accounting is a critical practice for lawyers and law firms to ensure proper handling of client funds. It involves tracking and monitoring the funds received on behalf of or belonging to clients or third parties, and involves several key steps: 

1. Receiving payment from clients in advance for services such as settlement money or attorney’s fees. 
2. Placing the money in a designated bank account, either a client trust account or pooled account depending on the amount. 
3. Transfer funds from the trust account to the firm’s operating account as the services are rendered. 
4. Returning any remaining funds to the client. 

It is important to remember that trust account funds must be kept separate from the firm’s funds and accurate records must be kept of all deposits and withdrawals. Trust accounting rules may vary by jurisdiction, so it is important to be familiar with the specific guidelines in your state.

Properly managing a trust account is of the utmost importance for lawyers and law firms, as a single mistake can result in the loss of a bar license. To avoid such issues, it is essential to avoid the following: 

1. Billing clients for payment processing fees without proper consent in writing, as permitted by state laws. 
2. Reporting trust account funds as income, as these are pre-paid funds belonging to the client until services are rendered or a settlement is reached. 
3. Allowing client, matter, or overall trust account balances to become negative, as good recordkeeping is essential to maintain balances. 
4. Withdrawing funds from the trust account too early or without proper agreements and documentation from the client, as this can violate state bar rules. 
5. Commingling business and client accounts, as it is important to keep the firm’s trust account separate from the clients’ accounts. 
6. Not maintaining client ledgers and only tracking money at the bank account level in QuickBooks.
7. Performing two-way reconciliations only, instead of performing a proper three-way reconciliation.

By following these guidelines and maintaining proper recordkeeping, lawyers and law firms can better manage their trust accounting and better protect their bar licenses.

Proper trust accounting is essential for lawyers and law firms to avoid negative consequences, such as loss of license or disbarment, as well as financial issues with clients. To help ensure compliance with trust accounting guidelines and protect your practice, consider implementing the following best practices: 

1. Perform a three-way reconciliation at the end of each month to ensure the sum of client ledgers, the trust ledger, and the trust banks statement match and are accurately reflected. 
2. Be transparent with clients about your billing practices and how trust accounts work, assuring them that their funds will be secure and used only for services. 
3. Educate your clients about your firm’s practices to build trust 
4. Always keep business funds separate from clients accounts, using software to track and avoid mishandling of funds if necessary. 
5. Maintain timely records to help prevent difficulties in resolving issues in the future. 
6. Delegate the bookkeeping tasks, but retain responsibility for regularly reviewing the work. To avoid oversights, it is important to establish a routine of monthly inspections and to remind attorneys of their ongoing review responsibilities.
7. Include client identifying information on all checks and deposit slips. This will facilitate efficient research and resolution of any issues that may arise in the future. Without this information, transactions can become indistinguishable, resulting in a prolonged research process.

Following these guidelines and maintaining good recordkeeping can protect your reputation as a lawyer and avoid legal and financial consequences.

The best trust accounting software will have easy-to-use features that make it simple for your firm to track and report on your trust account while keeping you compliant with three-way reconciliations. PracticePanther’s trust accounting software achieves this by keeping crucial features to manage your trust account in one place. Your firm can generate compliant invoice templates, perform three-way reconciliations, maintain separate trust and operating accounts, keep transaction logs, and run custom reports without leaving your PracticePanther account. Our platform also integrates with any legacy platforms your firm uses to limit duplication or loss of financial data.

Trust accounting software is a valuable resource for law firms to ensure compliance with the accounting rules and regulations for funds held in trust for clients. These rules, which vary by jurisdiction and state bar requirements, are put in place to protect the financial interests of clients and ensure that their funds are properly accounted for and managed. Trust accounting software can help law firms automate and streamline the accounting process, making it easier to track and manage client funds, maintain accurate records, quickly perform three-way reconciliations of their trust accounts, and meet regulatory requirements.

Trust accounting software, like PracticePanther, allows you to customize requirements for IOLTA transactions and closely monitor all associated transactions, balances, and payments. You can run custom reports to keep track of this information and easily view the trust account balance of a particular contact or matter over a specific period of time. This can be extremely helpful in ensuring compliance with trust accounting rules and regulations and protecting the financial interests of your clients.

With PracticePanther’s Trust accounting software, law firms can easily and efficiently manage their trust accounting in compliance with regulatory requirements. The software allows firms to run daily reconciliation reports for real-time financial records and easily track performance with custom reporting to identify trends and make informed business decisions. PracticePanther’s trust accounting features are designed to streamline the process and provide the necessary resources to help firms maintain compliance with trust accounting rules.

PracticePanther’s legal trust accounting software syncs contacts, payments, invoices, time entries, expenses and flat fees with QuickBooks.

Similar to our QuickBooks integration, PracticePanther’s legal trust accounting software syncs contacts, matters, payments, and deposits with Trustbooks.