Trust account reconciliation software compares three figures for the same date: the closing balance on the bank statement, the balance of the trust account in the firm's books, and the total of every client's trust ledger. When all three agree, the account is reconciled. When they do not, the difference points to something to investigate, such as an uncleared deposit, a bank fee not yet recorded, or a posting made to the wrong client.
This is called three-way reconciliation, and many regulators expect law firms to do it regularly, often monthly. Done by hand it means pulling three reports and matching them in a spreadsheet; software computes two of the three figures from the records it already holds.
In LawAOS, a person enters the statement closing balance. The database computes the book balance, the sum of client ledgers and the difference, returns a verdict of Balanced or a discrepancy, and stores the filed reconciliation as an append-only record. LawAOS is software your firm runs itself; it does not provide reconciliation as a bookkeeping service.
Matching the bank statement to the trust account's book balance proves the firm's total is right. It does not prove each client's share is right. A deposit posted to the wrong client leaves the bank and the books in agreement while one client ledger is overstated and another understated. The third figure, the sum of client ledgers, is what catches that kind of error, and it is why the LawAOS account header also shows account balance against client-ledger total on every view.
- A deposit recorded in the books that the bank has not yet cleared, or the reverse.
- A bank charge or interest credit on the statement that nobody has posted.
- A check written against trust that the bank has not yet presented.
- A posting entered on the wrong date, so it falls in the wrong period.
- A transfer between client ledgers entered on one side only, which LawAOS prevents by writing both sides in one transaction.
- Software (LawAOS)
- The firm runs the reconciliation itself, the records stay in the firm's own system, and the result is filed each period with a signature line for the responsible attorney.
- A bookkeeping service
- An outside bookkeeper performs the reconciliation for the firm. Many firms use one alongside software; LawAOS exports the records they would need but does not provide that service.
| Figure | First run | After recording the fee | Where it comes from |
|---|---|---|---|
| Bank statement closing balance | 50,000.00 | 50,000.00 | Entered by a person from the statement |
| Book balance of the trust account | 50,025.00 | 50,000.00 | Computed from trust postings |
| Sum of client ledgers | 50,025.00 | 50,000.00 | Computed from every client's ledger |
| Difference | 25.00 | 0.00 | Computed |
| Verdict | Discrepancy | Balanced | Computed |
The numbers are invented for illustration. In this example a 25.00 bank charge appeared on the statement but had not been posted; recording it as a Fee against the right ledger brings all three figures into agreement.
Keep trust postings current
Record deposits, drawdowns, interest, fees and adjustments on each client ledger during the month, and mark deposits Cleared as the bank clears them.
See the moduleEnter the statement closing balance
At period end, open the trust account's reconciliation and type the closing balance from the bank statement.
See the moduleRead the computed verdict
The database computes the book balance, the sum of client ledgers and the difference, and returns Balanced or a discrepancy.
See the moduleInvestigate and correct
If there is a difference, find the missing or misposted item and record it, for example a Fee or an Adjustment, then run the check again.
See the moduleFile and export
File the reconciliation as an append-only record. The Accounting page shows the same three-way check as a report with findings, a signature line and CSV export.
See the module
Stated plainly, so you can decide before you sign up rather than after.
- LawAOS does not import bank statements or connect to the bank for trust accounts; the closing balance is typed in by a person.
- Reconciliation is guided and run by a person each period; it is not automatic or continuous.
- LawAOS is software only and does not offer trust reconciliation as a bookkeeping service.
- How often you must reconcile and how long to keep records depends on your jurisdiction, which you need to confirm with your regulator.
Anything the list leaves open, our team answers directly.