Most Alaska personal injury attorneys do not spend much time thinking about their trust account until something stops matching. Usually it starts when the accounting system does not match 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. Sometimes there may be challenges with improper use of your accounting software.
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 operations.
If you are a legal firm and your trust account doesn’t reconcile, your accounting software and case management system don’t match, or you are not completely confident your trust accounting is correct, those are exactly the types of problems we help law firms work through and fix. You can contact us here to schedule a time to talk about your firm.
We specialize in legal bookkeeping, IOLTA management, and law firm operations. You can learn more about our services on our home page.