Bar members are entitled to FREE virtual consultations with Red Cave Law Firm Consulting. Red Cave will assist you with issues such as billing & collection, client relations, data management, financial management & revenue goals, marketing, social media content, office technology, time management, and disaster prevention & recovery. Check out Red Cave’s most recent law practice management tip below!
‘Trust Fall: If You Haven’t Already, Now Would Be a Good Time to Automate Your Trust Account Management’
Law firms put themselves through some interesting gymnastics in order to reconcile trust accounting, well or poorly – mostly poorly. There’s a couple of reasons for that: (1) Lawyers are pretty bad at math, finance. That’s definitely a thing. (2) Also, law firms tend not to focus on utilizing technology throughout the trust account management process, and errors tend to occur when busy lawyers (or their staff) use analog methods to try to balance accounts, or review account balances. IOLTA violations mostly occur due to user error (transposing digits, leaving out information, fudging an audit trail, misunderstanding the requirements of account reconciliation recordkeeping), not bad intent. The vast, vast majority of lawyers don’t actually want to steal their client’s money.
Literally the best way to tighten up your trust account management is to adopt software fit for the purpose. Trust account reconciliation can be made via accounting software, or time and billing software, or law practice management software. In some cases, reporting will already be set up the way you need it (for legal-specific software); and, in other cases, you’ll need to be able to set up the correct reporting outputs on your own. Even if you need the help of an accountant to set everything up, it’s still worth the effort moving forward -- as you can create three-way account reconciliation records at the touch of a button, rather than via several broken pencils and discarded templated paper documents.
Formalize your audit trails, more easily manage online accounts and keep better records in support of your ethical obligations.
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If you need to choose and implement the right software to get your trust account reconciliation on track, we can help.
The Rhode Island Bar Association offers free law practice management consulting services through Red Cave Law Firm Consulting. To request a consult, visit the Rhode Island Bar’s law practice management page, and start running your law firm like a business.