Pitfall # 2 – Losing Track of Trust Funds
Law firms often select a billing system without adequately analyzing their trust bookkeeping requirements. While attorneys understand the importance of complying with stringent trust account bookkeeping rules, they frequently don’t grasp that many billing and trust activities function like a bicycle built for two.
A standard practice for most law firms is collecting client payments in advance (retainers) for legal services. Depending on the nature of your cases, types of fees and relevant state laws, retainers might be deposited in a firm’s operating account or in a trust account.
As you weigh the advantages of an integrated billing & trust accounting system, do not forget that it’s not enough for the system to track retainer funds in trust accounts. Trust funds are strictly client funds that follow special accounting rules. Thus, the billing-trust accounting system must also provide required trust bookkeeping safeguards.
Trust accounting is a fundamentally different bookkeeping concept that must support monthly bank statement reconciliation, produce three-way reconciliation statements, general ledger balances with details about the portion of funds that have cleared/not cleared the bank, prevent common trust bookkeeping mistakes such as, co-mingling with other ledger cards, duplicate check numbers, etc.
If your legal billing and trust accounting software are integrated, you will notice a significant increase in operating efficiency and you can avoid Pitfall # 2.
Download and try Easy TimeBill. Add the optional Easy Trust module for seamless integration and manage all aspects of your time tracking, billing and trust accounting in one easy to use program. No need for a separate installation.