OTLA Trial Lawyer Winter 2021

53 Trial Lawyer • Winter 2021 gram or recording them anywhere else. Tip: Lawyers should consider using all-in-one practice management software programs like Cio, CosmoLex, MyCase, PracticePanther, Rocket Matter or Zola Suite with trust accounting software that is ready to use upon purchase. These programs have safeguards built into them to make trust accounting less complex and daunting. They can generate an in- dividual client ledger report, a trust ledger report, and other reports and documentations. General-purpose accounting software like QuickBooks, FreshBooks or Zero will work fine for trust accounting. But it will require a few additional steps from you. Properly set up additional accounts in the chart of accounts, ensure that different accounts are linked so data is entered only once, and set up other functions and reports necessary to ensure compliance. Not reconciling the trust account By now, readers may think Lee is a bad lawyer, as she seemed to be making one mistake after another. Lee is actually an excellent lawyer with a sharp legal mind and is highly respected by her col- leagues in the legal community. Lee’s challenges are strictly related to her lack of understanding about her responsibili- ties to manage the trust account. One of those responsibilities includes reconciling the trust account on a monthly basis — something Lee never did. She thought it was sufficient to look over her trust ac- count bank statements for withdrawals and deposits that she personally did not make. Lee did not understand that recon- ciliation is necessary to ensure she is correctly accounting for all client funds in her possession. It would help her spot red flags, follow up on transactions (e.g., when a check has not cleared), detect errors and take steps to correct them. Tip: A three-way reconciliation of the trust account should be done monthly to protect client funds. To run a three- way reconciliation, lawyers need to know (1) the balance of your trust ledger for all client funds (also called a trust jour- nal), (2) the balance of your reconciled trust account bank statement, and (3) the total sum from all individual client ledgers. The three balances should be identi- cal. If they are not, it means there is an error in the trust ledger and/or the indi- vidual client ledgers. You need to look at each transaction and make sure they are the same as in the bank statement and in your trust accounting system. It could be the amount was just entered wrong ( e.g., clerical error) or wasn’t entered at all in one of the balances. Whatever the error is, make sure you fix it and run the rec- onciliation again until all balances are reconciled. Not training staff This last mistake is not one made by Lee, but by another law firm. This firm hired a new office manager after the previous one moved out of state. The new office manager was in charge of cutting checks and paying firm overhead ex- penses. Unbeknownst to the firm, the new office manager started using funds from the trust account for this purpose in the mistaken belief that those funds belonged to the firm. The problem only came to light when there was an overdraft of the trust account and the Bar was notified. It turns out the office manager had no idea what the trust account was for, and the firm had no written protocols for disbursing funds. Tip: Many lawyers delegate trust ac- counting tasks to legal staff to free up time for the lawyers to do actual legal work. This delegation can lead to prob- lems if lawyers do not understand trust accounting and therefore cannot prop- erly train and supervise their staff. So in addition to educating themselves, lawyers need to train staff on using and maintain- ing the trust account. The PLF’s website See Trust Accounting p 54