Law societies and state bars alike have stringent requirements for the managing of trust accounts. As these are unearned funds that belong to the client until they are received as payment for your services, it is imperative to keep comprehensive accounting of these funds for auditing purposes.
Clio offers many features which can assist with this record keeping, and I am pleased to provide suggestions for complying with the NSW Law Society guidelines, as derived from the expertise of Nicole Billett, a loyal Clio customer.
Step 1: Recording all necessary details with trust account transactions
Any additional information that you can include when entering transactions into the trust account will save you time when reconciling your accounts each month.
This can include keeping track of a Receipt Number in the "Reference Field," and also entering the Matter Number as part of the Description for the Transaction.
In Clio, when receiving payments from trust, the funds either be specifically allocated to the Matter for which the bill was created or they can be added at the client level (associated with the billed client but not linked to any Matter). If you select client level funds from the Source, then those funds will automatically be transferred to the Matter when the payment is received.
Step 2: Including Trust Details on your Bills
With this information included with each transaction, including trust account details on a Bill Theme will provide much more relevant information to relay to your clients. To include this on the Bill Theme, go to your Clio Settings panel and click on "Billing" in the Clio Settings column. On the Bill Settings page, click the "Bill Themes" sub-tab, then click into the theme you want to modify or click the "New Theme" button.
In the Bill Theme options, click "Statement of Accounts" > "Client Account" and select the "Account Details" option under "Show Client Account Information".
With the additional transaction Information added, your client's trust account details on the invoice will display as follows:
As you can see, this will assist with displaying which matter the funds in trust have been associated, and keeping your ducks in a row in case of an audit.
Step 3: Monthly Trust Reconciliation
At the end of the month, you will need to reconcile your Clio trust account with your physical bank account information.
You will need:
- your bank statement
- a Bank Account Activity Report from Clio
To generate the Report:
- access the Reports page in Clio
- find the "Bank Account Activity" Report in the "Client Reports" section
- select "Specific Account" and choose your Trust Account
- under "Select Date Range, " choose "Custom" and select the same Dates for which your Bank Statement was issued
- check the box to "Include Opening Balance"
- for "Output Format" choose "PDF"
- click "Generate Report"
nce this report has been created, you may check it against your bank statement for accuracy. It will display all funds into and out of the trust account for the selected period of time.
Step 4: Cash Receipts and Cash Payment Journals
To create these, you will want to create a Bank Account Activity Report once again. This time, however, you will use the .csv format and open in a spreadsheet program.
You will be able to open this report in a spreadsheet program. You may then delete the columns for Account, Invoice Number and Practice Area, as they are not required for the receipts or journals.
Next, you will need to re-order the columns, as follows:
- Matter Number
- Client Name
- Matter Description
- Funds In
- Funds Out
- Responsible Attorney
Then, save the file in a .xls format.
Next, to sort the entries into Payments and Receipts:
- highlight all data in the table (CTRL+A)
- in the menu, choose "Data" -> Sort Range
- check the box for "Data has header row"
- for "Sort by" select "Funds Out" and A-Z
- click "Sort"
Locate the division between Payments and Receipts (where it switches between Funds In and Funds Out) and insert several new rows between these sections.
In the space below each section, enter the equation for the sum of both Receipts and Payments.
Next, you will want to calculate a "control account balance". This is calculated with your Opening Balance + Total Receipts - Total Payments. In this case:
You will then need to calculate the trial balance by creating a Trust Listing Report. This is located on the Reports page in Clio, in the "Client Reports" section.
The necessary selections are:
- Uncheck the box to "Show clients with zero balance"
- Choose "All Clients"
- Select a "Custom" Date Range
- Leave the "From" field blank
- Enter your "To" Date as the end of the current period for which you are reconciling Trust balances
You will want to first generate this report in "Web" format, to verify that the "Balance" totalled at the bottom of this report is the same as your "Control Balance."
Next, create this same report as a .CSV.
As this report does not divide the trust balances by matter, but rather by client, Nicole recommends going through the report and entering matter numbers and atter descriptions manually, in order to make the trial balance compliant.
To apply the necessary updates to this report:
Remove the columns for "Bank Account" and "Last Activity Date." This will leave you with a very basic report of just the client name and balance:
Add columns to the report for Matter Number, Matter Description, and Matter Trust Balance.
- Enter the relevant information for each of those clients, where the matter contains a trust balance. These balances can be found by running a Web or PDF form "Trust Ledger" Report. Add additional rows as necessary.
The matter balances should total up to the same number as the client balance total. If the numbers are not the same, you may need to check the the "Transactions" tab for the client, to ensure that funds have not been entered without a matter.
Step 5: Creating a Reconciliation Statement
You will now be able to create a summary of all of the information gathered in the previous steps, pulling the Cash Receipts, Payments, Trial Balance and Bank Statement into a tidy document.