Managing trust accounts is one of the most critical and regulated aspects of running a law firm. Law firms often collect client funds in trust accounts, and as bills are generated, these funds are used to cover invoices. But how do you accurately track and transfer the correct amount from your trust account to your operating account? Today, we’re diving into this topic and sharing a few practical tips on how to streamline the process using Clio, a popular legal practice management software.
The Common Challenge
A frequent question we get from law firms is, “How do I determine how much money I need to transfer from my trust account to my operating account after paying invoices?” It’s a realistic concern because accurately managing these transfers ensures that your firm remains compliant with trust accounting rules.
Let’s walk through how to efficiently track trust funds in Clio and determine the correct amount to transfer.
Step 1: Document Trust Payments Immediately
First and foremost, it’s a best practice to document any trust money as soon as it’s received, even if it hasn’t been deposited into the bank yet. Similarly, when you apply those funds to an invoice, make sure to record the transaction right away in Clio. Doing this ensures that you have the most up-to-date information at your fingertips when clients inquire about their balances or if you need to reconcile accounts.
Step 2: Using Clio’s Accounts Tab
One quick way to check your trust account activity is through the Accounts tab in Clio. Here, you can select your trust account and view all transactions, both money coming in and going out.
However, one downside is that this view doesn’t total up the transactions for you. While you can manually add up the amounts, you’ll need to ensure that each transaction going out is for an invoice payment, not a refund or another type of disbursement. For example, if you issued a refund to a client, that amount won’t go into your operating account.
Step 3: Generating a Bank Account Activity Report
For a more streamlined method, I recommend using Clio’s Bank Account Activity Report. This report not only lists the transactions in your trust account, but also totals them up for you, saving you the headache of doing the math yourself.
Here’s how you can use it:
- Go to the Reports section in Clio and select the Bank Account Activity Report.
- Choose your trust account and set the date range based on how frequently you transfer money to your operating account (e.g., weekly or monthly).
- I recommend selecting the option to include the opening balance, so you can cross-check it with your bank balance.
- After generating the report, Clio will show you the total funds that came in and out of the trust account for that period.
However, even with this report, you’ll still need to double-check that all the transactions listed are for invoices. For instance, if you issued a $250 refund to a client, you’ll need to subtract that from the total before transferring funds to your operating account.
Which Method Should You Use?
At the end of the day, the best method is the one that works for you and your team. Personally, I find that Clio’s Bank Account Activity Report is a simple and effective way to track trust fund transfers.
Whichever route you choose, keeping trust account records accurate and up to date is crucial for your firm’s success. Try out the methods we discussed and see which one fits your workflow best!
If you’re interested in more practice management tips, feel free to reach out to us at streamlined.legal. We’re always here to help law firms get the most out of their software and improve their day-to-day operations.
Recent Comments