Updated: Feb 16
State bar associations require law firms to reconcile their trust bank account to their client’s individual ledger (and thereby the trust ledger). The reconciliation is commonly done on a recordkeeping software, like QuickBooks, or a law firm software, like CosmoLex.
This reconciliation process is one of the more critical rules in trust account management, but unfortunately gets overlooked by many firms. It is most common for trust accounting to fall by the waist side in states that do not audit on a regular basis. Nonetheless, audited or not, reconciling your trust account monthly or quarterly is a must!
As a quick example, let us assume that a firm has three clients with balances in a trust account as of December 31, 2020. The firm should have three separate client ledgers tracking the deposit and disbursement transactions (one for each client). On a monthly or quarterly basis, the firm must reconcile/balance this to the trust bank account. The more it gets put off, the messier and more challenging it becomes to fix. If you do not have a strangle hold of your trust account and have questions, please feel free to reach out to me: