Trust Accounting, Simplified

Trust accounts are a death trap.

Your management of the account is supervised by bureaucrats with the authority to take away your license. Bureaucrats are in the business of enforcing the rules. They enforce smart rules and dumb rules equally. There are lots of rules about your trust account, and they dream up additional rules most years.

The regulators take violations of the rules very seriously. Reading disciplinary decisions regarding lawyers who mismanage their trust accounts is scarier than any movie I’ve ever seen. People get fired over errors you’d round off as “reconciliation errors” in your operating account.

Lose a few cents? Lose your license. Forget to send an accounting? They “forget” to renew your license next year. Accidentally put funds in the wrong account? They “accidentally” suspend you for two years.

I don’t blame them. They’re right. Trust account money isn’t ours, and it’s to be treated respectfully. The way lawyers manage the money of their clients is part of the core of the trust we maintain as a profession. The bar regulators are doing what they’re charged to do. Okay, I get it.

What's the Solution?

So, given the situation, we’ve got to find a way to manage our trust accounts, make sure it’s done right, and do it all without spending huge gobs of time or money on the task.

We need a simple, cheap, easy trust accounting system that we can manage ourselves or hand off to an employee. It needs to work well, and it needs to keep us out of trouble.

Sadly, and kind of amazingly, there aren’t many solutions for this problem on the market. Much of what is offered is either (1) included in a practice management system we don’t really want to use or (2) built into an accounting system designed for businesses other than law firms.

We use QuickBooks Online for our trust accounting. I’ve talked to lots of lawyers using it as well. Interestingly, because it’s not designed for what we’re doing, we hacked together a solution within the software. Every lawyer with whom I’ve discussed trust accounting in QuickBooks is doing it differently. Everyone is piecing it together. It’s a hassle.

Some firms, usually larger groups, use trust accounting software aimed at midsized and large firms. It’s good, but it’s expensive and complicated. It doesn’t make sense for smaller firms to spend the time and money on most of the solutions on the market.

Three Essentials for Trust Accounting Software

Here’s what we need:

  1. Simple. The software needs to be brain dead simple. We need a ledger for the account, details for each client, the ability to send client reports, and a reconciliation function. It needs to be so easy that a lawyer can do it without help from an accountant, bookkeeper, or other assistant. The menus should be right up front, and everything you need to do should be a click away.
  2. Hosted. The product needs to be hosted elsewhere and accessed via web browser. We don’t need software that requires a server or complicated installation. Someone else needs to keep the software up-to-date and backed up. Someone else needs to be responsible for backups and maintenance.
  3. Cheap. We’re willing to pay, but not much. If it’s expensive, we’ll just break out an Excel spreadsheet instead. How about $200 per year or $25 per month, per user? The expense is trivial when we weigh it against keeping our licenses, but it’s still real money. Given the stakes, $200 a year is cheap.

My needs are simple. I’m easy. I want easy-to-use software that I can use myself. I want it hosted, and I want it cheap. Is that too much to ask?

Here's the Answer

Nope. Not according to the guys at TrustBooks. They’ve built the product, and it's simple, hosted, and cheap. The company will even let you try it for free. You can screw with it for a month and decide whether it’s for you. That’s what I’m doing now.

Once you get into the product, you’ll find that it really is simple. It’s incredibly easy to use. But—and I love this—it has some smart stuff built in.

Try to write a check for more than the client has in trust. Bang, it reaches out and slaps your fingers on the keyboard. You can’t write the check. That’s a good thing. The software knows how to keep you out of trouble. You’ll find all sorts of features designed to protect you from the bar regulators and from losing your client’s money.

Is the product perfect? Not yet, but it’s on the way. I’d like to see it include a connection to my bank so I can download data. It doesn’t have that yet, but it’s on the road map. I’d like to see an easy import of old data from QuickBooks or whatever you’re using. Again, it’s not there yet, but it's got some great ideas on alternative solutions.

The CPA who built TrustBooks knows trust accounting. That’s what he’s been doing for law firms for years. He knows the rules and regulations, and he knows how to keep you out of trouble. TrustBooks is the result of his experience and his insider law firm knowledge.

TrustBooks comes with a 30-day free trial. What are you waiting for? Trust accounts really are a death trap. TrustBooks might save your life.

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