A good number of attorneys/solicitors/law firms who are unaware of legal bookkeeping terminologies often face challenges while managing Trust Accounting reconciliation.
Law Firms operate to keep accurate records of the clients’ funds. They offer accounting services also to ensure that the funds are properly used. However, while doing this job they lack knowledge about how to handle Trust Account in practice.
As a result, small businesses which rely on legal accounting services offered by the legal firms often become victims of illegal and harsh practices of accountants.
Here, I will explain the meaning of Trust Account and share a couple of guidelines related to the successful maintenance of an account.
Trust Account
The principal objective of Trust Account is to protect and maintain clients’ funds. All these funds are collected in connection with various reasons, e.g. for settlements, retainers or disbursements.
Trust accounts are dedicated to keeping clients’ funds. A legal accountant must uphold transparency and conform to ethical and legal obligations.
5 Guidelines for maintaining a Trust Account
A specialist should have a clear understanding of the rules of maintaining a Trust Account. These are some best practices mentioned below.
1.Creating a separate account
A separate client account book for every client should be maintained.
2. Clearly segregate funds
The money which is kept in Trust Account belongs to the clients. It should not be mixed up with the firm’s assets.
3. Frequently following Review procedure
The lawyers should keep records of all transactions including detailed and accurate information regarding deposits and withdrawals. They should update Trust weekly and monthly account data regularly to ensure that there is no erroneous payment or withdrawal. Such frequent reviews will enhance transparency and accountability of record keeping.
4. Showing Commitment towards compliances
Trust Accounting should follow ethical and legal guidelines, which is also termed as Trust Account compliances. Besides, to ensure regulatory compliance, the legal accountant needs to keep the records for matter-to-matter trust transfer, trust deposit or payments.
5. Following Strong Reconciliation practice
3-way reconciliation is another distinctive feature of legal bookkeeping. In such reconciliation, we need to make sure that the trust account records keep complete semblance with client trust ledger and bank account statements. Regular reconciliation is required to find errors and potential fraud.
If you are running a small business, you will need the help of a legal accountant. When you depend on a law firm bookkeeping services with your funds you must gain knowledge about the basic terms of legal bookkeeping so that you can easily avoid facing unnecessary issues.
