A Primer For Trust Accounting

By Author: Mayank Kapur
Total Articles: 278
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It's not enough for your Attorney billing and trust accounting software to track retainer funds in trust accounts. You need trust bookkeeping safeguards, too.
Let's go back to what we know about professional ethics. The only things that get deposited into a trust account are as follows:

Funds for real estate transactions (i.e. escrow funds)
Personal injury settlements
Other settlements / judgments
Collections
Unearned retainers
It all comes down to fiduciary responsibility. So you don't co-mingle personal funds, earned fees, and operating expenses into your client's escrow account.
The other thing you've got to do is segregate client funds. To keep from co-mingling client A's funds with client B's money, you either keep the funds in separate accounts, or as separate entities—each with its own balance and transaction report—in the same pooled escrow account.
Finally, if you've overspent what a client has in retainer account, you've got to cover any overdraft amount back from your personal funds—immediately.
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... Every month, you've got to show that you've reconciled every escrow account—matching your books with your bank statements. The balance in your client's bank escrow account has got to match the total cleared in your books—month after month. This is where you'll identify any missed steps or other mistakes. Skip this step—and you're waiting for disaster to strike.
If you're keeping good records, then you're leaving a paper trail for potential auditors. You're keeping—not just your account statements, but also canceled checks (if applicable), check stubs, deposit slips (make your own copies), copies of all receipts, and a disbursement journal. In place of a disbursement journal, you can report from a good trust account software, such as Easy Soft Easy Trust .
Check your state's ethical rules and regulations for state-specific trust accounting management rules. In fact, you should keep a current Rule Book right in your offices.



Don't lose sleep over trust fund accounting. Follow these simple rules and you'll always be prepared for an audit.

Author Bio

Easy Soft specializes in helping law firms with legal Software. Practice management software such as law office billing software and legal time tracking software.