In the last post, we talked about the necessity of keeping your trust accounts spic and span, and putting retainers into trust accounts until earned.

Easier said than done, right? Especially if you’re a small and busy law firm with a lean staff.

But it is easy if you have our Easy Time Bill and Easy Trust products, legal billing and trust account software designed to work hand in hand.

It’s simple. You get a retainer. Unless it’s one of the exceptions (see below), you put it in escrow.

You bill your time—easy with the built-in timer function in legal time and billing software such as Easy Time Bill (just click it on, then click it off). Every month, you invoice your client against the retainers—also easy, since Law firm billing software such as Easy Time Bill collates and itemizes all time for each matter, generating an accurate, easy-to-read invoice. On each invoice, you’ll also need to supply the current balance in that client’s retainer.

Then, you or your billing department can transfer the invoiced funds to your operating account.

If the retainer is in a trust account, this involves:

• Issuing a check on the trust account for the invoiced amount, payable to your law firm.
• Depositing the check into your firm’s operating account.
• Applying the deposit to the invoice.
• Marking the invoice as “paid.”
• Updating the client’s retainer balance accordingly.

If the retainer is in an operating account, this involves:

• Applying the funds toward the current invoice.
• Marking the invoices as paid.
• Updating the client’s retainer balance accordingly.

Let’s take an actual example.

1. On January 1, you opened a new case with an initial retainer of $5,000. You deposited the $5,000 in your attorney trust account. Your trust books need to reflect a retainer balance of $5,000.

2. In January, you record $2,700 in time and expenses. You charge it to the matter.

3. On January 31, your books need to reflect the following: $2,700 for the unbilled balance, ad $5,000 for the retainer balance.

4. On February 1, you generate an invoice. This converts unbilled time and expenses to billed. Your books now need to reflect $0 for the unbilled balance, moving the $2,700 into the unpaid balance column. The retainer balance is still $5,000.

5. The same day, you pay the invoice from the client’s retainer balance. Your books now need to reflect the unbilled balance as $0, the unpaid balance as $0, and retainer balance as $2,300. You can make a deposit of $2,300 from your trust account to your operating account.

That’s a lot of steps, right? Trust us: having your law firm billing software work with your escrow software saves a lot of time and aggravation. Our next post will explain what happens when these steps are out of sync. Click here to learn more now.

Sure, you’re smarter than the average Jamie…and your logic is, well, flawless. But in many ways, the law is just like other professions. You advise clients. You prepare forms and other documentation. Your brain is your biggest tool—followed by that smart paralegal you hired, and (let’s not forget!) your legal software. You bill hourly, and collect a retainer against your billing.

Stop right there! The legal retainer is different from other professions. It’s simple. The state says that until you’ve earned the money, it doesn’t belong to you. To put it in legal terms, possession does not equate to ownership—at least not when it comes to retainers.

Therefore, unearned retainers—particularly ones that won’t get used quickly—go into trust accounts, not operating accounts. Breaking this is considered a serious ethics violation—and you don’t want to face the consequences.*

So How Do You Keep Track Of The Money?

Even if you have the greatest legal billing software in the world (and of course we think that’s Easy Time Bill): without a compatible trust component, you put yourself, your firm, and your career at tremendous—and unnecessary—risk.*

That’s why it’s not only helpful, it’s imperative for you to have escrow software or trust accounting software, too. It’s imperative for your law firm billing software to work hand in hand with that escrow (or trust accounting) software.

To be clear: attorney billing software without trust account software is like having a calculator that only adds, and doesn’t perform any other functions. To multiply or subtract, you have to use another calculator.

Trust accounting software without legal billing software is like having a factory that only makes the bottles. You have to go somewhere else for the caps—and they’re not designed to fit.

That would be ridiculous, right?

In comes Easy Soft. Our Easy Time Bill and Easy Trust products are designed to work hand in hand. When the two pieces work in tandem, the system tracks what you’ve taken against what you’ve earned. You no longer need to tell the difference between the two: your compatible law office software system does that for you.

Our next post will explain how it works. Click here to learn more now.

*State ethics departments have a tendency to audit law firms at random.