Trust Accounting For Paralegals
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.