Managing trust funds for multiple matters in a single bank account is a common practice in the legal industry but attorneys must be very careful not to let the funds intermingle. Each matter has to be scrupulously maintained as a separate entity and never “borrow” money from other matters in the same bank account. Law offices have several options for documenting trust accounts .
Manual Books – It’s rare to find a business that keeps their books in literal books anymore, but a few firms, particularly single-attorney practices, prefer manual bookkeeping. Manual bookkeeping is slow, susceptible to arithmetic errors that can take hours to track down, and clumsy when it comes to tracking multiple matters in a single account. Computers are commonplace and software is cheap so there really isn’t any practical reason to work with pen and paper anymore.
Spreadsheets – Raise your hand if you remember VisiCalc. Wow, you’re old! VisiCalc was the first spreadsheet program released in 1979 and was designed to mimic the manual ledgers bookkeepers used. Trust fund accounting with a spreadsheet is a step up from manual books since it eliminates arithmetic errors, and nearly every computer comes with Microsoft Office preinstalled so the software is effectively free. However it is difficult to track individual matters within an account or reconcile an account without a lot of sorting and other manipulations.
Personal Finance Software – Applications designed to help consumers track their checking accounts and credit cards add reconciliation functions and are significantly less expensive than business software. Matters can be tracked in an account by using the client as a budget category. On the other hand there are no protections to prevent you from overdrawing a client’s trust fund, a critical error in trust management, and no ability to network across multiple attorneys. This might work for a single-attorney practice but is not an ideal solution.
Business Finance Software – Products like QuickBooks or Peachtree offer double-entry bookkeeping, which reduces the chance of keying errors by requiring all transactions to balance out. They can be networked across the firm and data can be manually transferred to escrow accounting software like Easy Trust but still are more limited than solutions tailored to legal trusts.
Dedicated Trust Applications – Only legal billing and accounting software will have all the features needed for fast, accurate and secure trust management. Integrated trust features ensure that each matter is accounted for separately. Attorneys can see trust status at a glance without having to pick it out from all the other transactions in the bank account. Automatic warnings let the firm know when a trust balance is getting low, and three-way reconciliation ensures no money falls through the cracks.
Attorneys might be worried that specialized legal software is more expensive than the alternatives, but Easysoft Legal Software’s law practice management software is surprisingly inexpensive. Try our trust account suite and if you aren’t completely satisfied, then return it for a full refund within 30 days.