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Attorney Trust Accounting
The larger the firm, the more complicated trust fund management can be. It’s hard enough tracking multiple matters in one account, plus other matters each with their own accounts, but then you add multiple attorneys, paralegals and other staff members and it quickly becomes an administrative nightmare. Legal billing and accounting software simplifies, automates and centralizes the process but attorneys still need to be aware of the rules governing the accounts.
First let’s get the obligatory disclaimer out of the way. We aren’t lawyers; we merely develop and sell attorney practice management software. This article presents generic trust fund regulations. Check your state laws to find out how things work where you are. The information here isn’t legal advice–but you’re a lawyer so you should know that already.
In a large practice you have multiple attorneys handling cases with trust accounts. Although legal accounting software makes it easy for lawyers to handle their own trusts, is it permissible to centralize all trust accounting functions? Yes and no. Yes you could assign a single attorney to handle all trust matters and have the other attorneys delegate trust transactions to that one, however if a mistake is made then the attorney handling the case is ultimately the one who will be held responsible.
Is it permissible to have a non-attorney handle trust transactions? Again the answer is yes and no. A paralegal, accountant or bookkeeper could handle entering the daily transactions, generating reports, balancing accounts and so on but this person must be supervised by an attorney. Software makes oversight simple as the lawyer using time billing software reviews the work done by the staff to ensure all regulations are followed.
Remember that everyone needs to know the rules on trust account management. Even if attorneys aren’t entering their own transactions, they need to periodically use the trust accounting system to review and verify that their clients’ money is being handled correctly according to the law.
Centralized trust management and a 360-degree view of trust accounts are just two of the features that make Easy Trust an essential tool for today’s legal practice. Try the product free for 30 days and discover how much simpler escrow administration can be.
Trust management is complicated even at its simplest–and real trust accounts are never simple. This is why it is essential that attorneys use dedicated escrow software designed to handle the unique needs of trust accounts. These tools make it easy to administer even complex transactions.
For example, it’s pretty straightforward that when you receive a deposit for Matter A then you assign it to Matter A in the legal billing and accounting software. But what if you get a check that has payments for Matters A, B and C? It’s not like you can tear the check into pieces and deposit each amount separately, and yet you must keep the funds from intermingling.
Legal accounting software allows you to assign a single deposit to multiple matters from a single screen. The software carefully tracks every penny to the right account so when you print a report on Matter A, you will see only transactions for Matter A including the partial deposit from that check.
It works for withdrawals as well as deposits. Let’s say an attorney hires an outside investigator to research some cases. The attorney pays the investigator once a month but might be paying on a dozen different matters. You need each payment to come from the proper fund but don’t want to issue a dozen checks. Instead you can issue one check and when you record it in the trust accounting system then you can allot each portion of your payment to the correct matters so they will come from the appropriate funds.
Sure you can do these things by hand. Ever since we’ve been recording monetary transactions by making marks on clay tablets, there have been bookkeepers and accountants who meticulously track complex accounts. However you don’t need to do laborious and tedious manual tracking if you use dedicated legal practice software that handles these transactions routinely.
Most of us don’t balance our checkbooks without software, so why wouldn’t you do the same for something as important as a trust account? Explore our site to find out more about how Easy Trust makes trust administration easy and safe for your firm.
Most attorneys understand that when it comes to ethics, perception is reality. An honest attorney can still get in trouble if it even appears that something questionable has happened. When it comes to ethics, attorneys can be presumed guilty until proven innocent. This is true in all aspects of legal practice but especially when it comes to trust accounts.
The number one protection against ethics charges is comprehensive and accurate information. This used to mean rooms full of file cabinets documenting every financial transaction. Modern attorneys track this information with legal billing and accounting software with trust account capabilities such as Easy TimeBill and Easy Trust.
Dedicated lawyer trust account software simplifies the process of entering, tracking and retrieving transaction information regarding trusts. Attorneys use the software to keep each matter in a mingled account separate, so that “on paper” each is treated as an isolated account. The software generates comprehensive transaction reports that make it easy to track every penny that has come in or out of a trust.
Attorney time and billing software has evolved as computer technology has advanced. As we move into an increasingly paperless society, many of the receipts and statements a firm receives are electronic. The software can link to the electronic copy so a user can pull up the original document rather than depending only on the numbers entered in the software.
The latest innovation in attorney practice management software is the cloud. A firm’s trust information is stored in offsite servers that are both highly secure against intrusion and yet easily accessible to authorized users. Attorneys can access or enter information from anywhere. This allows lawyers to enter a transaction the moment it happens rather than stuff a receipt into a pocket, hoping to remember it later.
Your word may be good, but it won’t be good enough if you end up under an ethics investigation. Without hard data backing up your claim you could be subject to financial penalties or even disbarment over a simple misunderstanding. Contact Easy Soft to find out more about how our accounting and trust software protects your practice from ethics charges.
The transition to cloud software makes some attorneys nervous. Client confidentiality is core to the legal practice, especially for tasks such as trust fund accounting. Is it really safe to use cloud-based legal billing and accounting software? Absolutely. In fact, it’s probably safer than using desktop tools.
Think about it in legal terms. The average citizen can file bankruptcy, get a divorce or even face criminal charges without an attorney but it’s rarely the wise choice. There are so many pitfalls and subtleties to even the simplest laws that the best option is to hire a lawyer to get access to the legal expertise necessary to resolve the case successfully.
Just as it’s best to let attorneys handle legal matters, it’s best to let IT experts handle escrow software matters. Does your practice have a dedicated digital security team? Probably not. Even the largest firms can’t afford to employ the level of talent you’ll find at a typical cloud datacenter.
When you trust your attorney time and billing software to the cloud, you are turning the technical duties over to experienced IT professionals. They make sure the software is always up to date against the latest security threats. They employ the latest software and security tactics against viruses, malware and hackers. They house your information on redundant storage networks housed in physically secure locations. They back up your software regularly allowing easy recover in the event of disaster.
Your online transactions are protected by the same encryption technology used by global financial organizations. It’s just as safe as doing online banking. Your information is also encrypted when it is stored so that only you can access it. Even Easy Soft employees and IT workers at our datacenter can’t look at your files.
We spent a great deal of time and effort ensuring that the cloud-based versions of our law practice management software were secure before we released them to the public. We have built a reputation of trust among our clients for over 20 years and we weren’t going to jeopardize that by offering an inferior product.
Contact one of our software specialists at 800-905-7638 if you have any questions about the security of Easy Soft’s cloud-based products or any other aspect of our line legal practice tools.
Even a one-person law firm has to manage multiple trust matters through a single account, the dreaded IOLTA. Even though the monies are all in one account, every single penny has to be tracked separately so the firm doesn’t accidentally–or purposely!–”borrow” from one matter to pay expenses on another. It gets even more complicated in larger firms when many attorneys, paralegals, accountants, bookkeepers and clerical staff members need access the trust records.
Attorney time and billing software takes a lot of the headaches out of the process. Arithmetic errors are a thing of the past, although users still need to be careful about simple data entry mistakes such as transposing numbers. Dedicated escrow account software facilitates the process of tracking each transaction and assigning it to the proper matter, ensuring the funds don’t intermingle.
Today’s networked trust accounting software allows employees from all over the firm to access trust records, with permission of course. Anyone working on a matter can enter transactions as they happen rather than forwarding paperwork to an accountant or bookkeeper to enter the figures. People familiar with a case are less likely to make data entry mistakes than someone entering meaningless numbers off an invoice.
Security is a key element of attorney practice management software. Attorneys must maintain client confidentiality, even within the practice. Nobody should have access to a client’s file who isn’t working on the case. Security is even more important when dealing with trusts. Only authorized users will be allowed to enter transactions. Users can be given limited, view-only access if they are workers who need to audit the records or generate reports but don’t need to be able to make changes.
Attorney trust account software walks a delicate balance between accessibility (which allows employees to complete tasks quickly, accurately and efficiently) and security (which prevents problems ranging from simple mistakes to deliberate fraud). Don’t settle for half measures. Use only dedicated trust software to manage your escrows so you can be assured you have the accessibility and security features your practice needs.
Find out more about Easy Trust, our escrow software, by downloading a demo or contacting an Easy Soft representative.
Paralegals are vital components of any medium to large law office. They have the knowhow to take on some of an attorney’s more routine duties at a much lower cost to the practice and the client. However attorneys need to judge whether a task is appropriate to a paralegal’s ability and integrity, especially when it comes to trust fund accounting.
Most law offices indulge in a certain amount of money management for their clients. They are responsible for collecting fees and retainers and ensuring that these monies are spent appropriately in the client’s interest. Maintaining separate bank accounts for each client would be an administrative and cost nightmare so most funds are merged into a central fund called an IOLTA (Interest on Lawyers Trust Accounts).
Monitoring the funds of potentially dozens of clients and keeping them separate isn’t as hard as it used to be with modern legal billing and accounting software with built-in trust functions. Even with these applications the routine bookkeeping can be a chore and a waste of an attorney’s time so this is an ideal task to turn over to a paralegal…or is it?
Trust accounting mismanagement is one of the leading sources of ethics complaints against law practices. Deliberate fraud is rare but even clumsy accounting practices can lead to serious financial penalties, a damaged reputation and loss of clients. On the one hand such a vital task should perhaps be kept in the hands of a lawyer but on the other hand, seriously, this stuff puts accountants to sleep.
If you are going to turn these functions over to a paralegal then be sure to provide adequate training in trust law and in proper operation of the attorney time and billing software. The paralegal should never feel lost and should be encouraged to ask questions if confused at any point. This is not a “close enough” function. Every penny must be accounted for and applied to the correct matter.
Some other party, probably one of the attorneys, should oversee the paralegal and occasionally audit the records. Networked attorney practice management software keeps the auditor from having to look over the paralegal’s shoulder and makes it easy to keep an eye on client accounts. If anyone in the firm notices a discrepancy it should be reported immediately.
Easy TimeBill software includes Easy Trust, our fully-compliant escrow management application. Contact us to find it help you administer IOLTA accounts safely and securely.