Most Alabama personal injury attorneys do not spend much time thinking about their trust account until something stops matching. Usually it starts when the numbers in the accounting software do not match the numbers in the case management system, or the trust account will not reconcile and no one is quite sure why.
This is very common in personal injury firms because settlement accounting is more complicated than most people expect. Settlement funds move through the trust account, then get split between attorney fees, clients, medical providers, costs, and liens. If even one part of that process is recorded incorrectly, the trust balance and client ledgers slowly stop matching over time.
When Trust Accounts Don’t Reconcile
When a trust account does not reconcile, it usually means a deposit was recorded incorrectly, a settlement disbursement was entered wrong, or an old transaction was never cleared properly. Sometimes the issue is recent, but many times the problem actually started months or even years earlier and slowly built up.
Why This Happens in Personal Injury Firms
Personal injury firms handle settlement funds in ways that are more complex than many other practice areas. Each settlement can involve multiple parties and multiple payments, and it requires careful tracking through both the trust account and the case management system.
Where to Start If Your Trust Account Is Off
Start by comparing the trust bank balance, the trust ledger balance, the trust liability balance, and the total of all client trust balances. These numbers should match. If they do not match, the issue is usually related to a deposit, disbursement, or uncleared transaction.
When It’s Time to Get Help
If the issue involves older transactions or system differences, it may take significant time to correct. This is when many firms bring in someone who specializes in legal bookkeeping, IOLTA management, and law firm financial operations.
One of the challenges with finding an expert is that only approximately 2% of bookkeepers in the USA specialize in trust accounting. Rebel Patriot Business Services and Rescue My IOLTA are part of that 2%. When it’s time to protect yourself and your clients, we’re here to help.
You can contact us below or at this link.
