Specialty Bookkeeping for Lawyers and Law Firms
Bookkeeping for lawyers has several unique elements compared to standard business bookkeeping due to the nature of the legal profession. One of the most prominent and unique elements is the handling of client trust accounts, also known as IOLTA (Interest On Lawyers Trust Accounts) in some jurisdictions.
Key components of bookkeeping services for lawyers and law firms:
- Client Trust Accounts (IOLTAs):
- Lawyers often receive funds on behalf of their clients, which must be placed in a trust account. These funds could be for retainer fees, settlements, or other payments.
- Trust accounts must be kept separate from the law firm's operating accounts.
- It's imperative not to commingle firm funds with client funds.
- Interest earned on certain trust accounts (IOLTAs) is typically forwarded to state programs that fund legal services for those who cannot afford them
- Clients often pay a retainer fee up front. This amount is deposited into the trust account and then drawn down as work is completed.
- Regular accounting is needed to ensure that the retainer balances are accurate and clients are billed appropriately once the retainer is exhausted.
- Ethical and Regulatory Requirements:
- Many jurisdictions have strict rules governing attorney conduct, including how funds are handled. Law firms must ensure that their bookkeeping practices are in compliance with these rules.
- Audit Trails:
- Given the regulatory scrutiny and the importance of transparency in financial dealings, it's essential to have robust bookkeeping systems with clear audit trails.
Additional bookkeeping services for lawyers and law firms:
- General Ledger Management:
- Maintaining and updating the general ledger.
- Reconciling bank and credit card statements.
- Tracking assets, liabilities, income, and expenses.
- Trust Accounting:
- We work with your billing department to reconcile and review trust balances, monthly. We report irregularities to your staff so they can take the appropriate action to bring account into compliance.
- Managing client trust accounts in accordance with legal regulations.
- Tracking individual client funds and disbursements.
- Reconciliation of trust accounts.
- Compliance with state and local regulations related to IOLTA (Interest on Lawyers Trust Accounts).
- Expense Tracking and Reporting:
- Categorizing and tracking overhead expenses.
- Monitoring overhead costs, such as rent, utilities, and office supplies.
- Preparing expense reports for tax purposes.
- Financial Reporting:
- Preparing income statements, balance sheets, and cash flow statements.
- Customized reporting for partners, clients, or practice areas.
- Monthly, quarterly, or annual financial reports.