How To Balance a Trust Account

Welcome to Accountants LawPod, where accounting professionals and law firms converge, hosted by Linda Artesani, Sarah Prevost, and Stephen Libhart.

Welcome back to the podcast, everybody. And today's topic, I think, is going to be one that will be much listened to, and it's how to balance a trust account. We were all kind of joking before we started today saying, ah, I'm out, I don't want to talk about this topic. We talk about this topic all the time. And actually, it was Steve. So I'm going to toss it over to Steve and let him start to talk about how to balance a trust account and why do we want to balance a trust account. Go ahead, Steve.

Well, it's, it's so vitally important. That's the one of the main reasons that our clients hire us, that our legal clients hire us, is to keep those trust accounts in balance and keep them out of hot water. You know, one of the things that, that I've learned in, in helping to train people over the years on how to balance the trust accounts, you know, you've got 3 legs of that trust account that you've got to balance. You've got the bank, the billing software, and the bookkeeping software, quite often I see people stumble in making entries as to what they think should have happened, not what really happened. And as an example, maybe they messed up a trust transaction and they're like, well, I'm just going to post what should have happened. And then we go to balance the bank statements against the trust accounts and we find out that that's not what happened at all. And so it's training people that it's one step at a time. It's double-checking your work. If there's ever any piece of work that you want to double-check, it's your trust transactions. So if you make a journal— if you post a journal entry to the trust account and the bank and all these different things, you want to go back and double-check and make sure that it's there, that it's correct. And the most important thing is keeping these clients out of trouble. And, you know, trust— I love the subject of trust accounting.

I did.

I'm just weird that way. But You know, I can go down a lot of different avenues here, but one of the big ones that I like to do— and I'm making Sarah laugh— but one of the— get Steve all excited here.

Give him candy. It's his candy.

It's my candy. I love trust accounting. Totally love it. Love the challenge and the puzzle and figuring it out. But I want to throw out there really quick, too, you can become such a hero with your clients, number one, by keeping the trust account in balance. Following the procedures, having your SOPs made and following them, sharing those with the clients so that they understand the process because they don't want to do the work. They're not going to take it away from us, but they need to know what to do. And then number 2, being very honest with them if they make a mistake and explaining to them the whole process. And then number 3, the KPIs that are related to it. Trust transactions become marketing tools. They really do. They— the more money that you can teach your client to have in the trust account, the more future business they have, and the more you can tie KPIs, key performance indicators, to that trust balance. I'm going to throw it back out to you two, but those are my passionate things about trust accounting.

I have a good question for Sarah. All the attorneys we've talked to over these 5 years or so How many of them tell you that their trust is balanced?

All of them.

And how many of them actually are balanced in compliance, the viewpoint of compliance?

We've only had one.

Yes.

We've only had one out of all of them.

Seriously, that is a true, true statistic.

That is such a good point because they're gonna right away, they're gonna tell us, so we'll take them on. Oh yeah, it's imbalanced.

Yeah, it's usually, but Balanced in the bank with QuickBooks isn't the same as balanced for compliance.

Right?

Right. I mean, I think that that's the part we like to drive home. And I often also wonder how many people actually give their client a 3-way bank reconciliation.

Well, whatever they give them. I mean, no matter what, I think the value of the data that's provided is considering— it's the consideration of Did the bank actually handle it right? Did the transactions clear as written? Did, um, did we look at what the undeposited funds or the uncleared checks are? Um, did we— to Steve's point, which I think is a really good point— the intention was I wanted it to go this way. Uh, that really actually did not happen like that. So how are you gonna—

That happened at the bank.

Yeah, right.

That's the source.

The source of truth. Yeah, Linda and I always talk about this. Yeah, you may have well-intended this transaction to be this way, but the reality is that's not how it transferred. We even had banks— I mean, no one's perfect. We've had a bank totally take an entire transfer of multiple transfers and double it up. And thank God there was money enough on both sides, but how incorrectly was that done? And then the fact that we had to like help this person get it back and the bank was It was just challenging. And so no bank has it right. We've had it where a bank throws the interest in but never took it out. Yep.

Okay, well, try to tell your client. Yeah, try to tell your client they gotta go fix 32 cents.

Yeah.

A penny. Some banks will straddle that over months too. They'll take the money out in one month.

Yeah, that makes it harder.

Yes, I just did a cleanup like that and was like, you're kidding me, I'm gonna kill this thing.

Yeah, it's never zero.

Let me ask you 2. In your honest opinion, is that client in balance during the bridge of that transaction happening? They're not.

Technically, they're not per se, but they are by means of the validation of what's happening.

We put it in a clearing account, so eventually it'll clear out the next month. And we put it as a sub-liability account. So it is, it's in compliance, but there's money in there that really shouldn't be there. I don't understand why that happens on some banks. I mean, dealing with the banks is just a challenge in itself as a legal bookkeeper or an accountant. Because all the banks are different and some, some are more difficult to work with than like the Chase and the Bank of America, the big banks that have a better array of banking, online banking. But I also think since this topic is how to balance a trust account, remember the trust account balance, the money that's in that trust bank, you need to know who belongs to each and every penny. That's the key to that. Just because that money is sitting there, it's not the same as operating with, you know, the firm owns $10,000 and it's $10,000 that belongs to the firm. That's the balance at the end of the month. It's who belongs to every single penny that's in that trust account. And that's the part that gets missed because we see firms that think it's balanced in the accounting because it bank matched, and they don't even do the reconciliation piece of it. So that's not, that's not reconciliation. That's not— you need to know who it belongs to.

Even bank matches can get the better of anybody.

And be wrong. Exactly.

They can be wrong. You batch it, you don't batch it, you individualize it, you have the same recurring amount.

Yes.

Name in it. You didn't validate the source of where it came from. So how do you know it's that? And you've got 7 of them to match to.

I've seen situations where they don't take the uncleared checks as an example into account. And then they're like, okay, well, I need to move more money over to the trust account now. And it's like, no, no, no, no, no, no, don't do that. So, you know, the workaround for that is to provide them with a spreadsheet each month that shows the uncleared checks and the reconciliation report and the bank statement and get them in the habit of signing off on all 3 of those documents so that you can keep them in your source documents for that client and protect you in your liability insurance.

Yeah, we've seen attorneys that they take consultation fees in and they put it into trust because that's the bar rules for where they are. And then they move it back over because they've earned the legal income, they've done the consultation. And we've seen them just leave it there as a cushion. Yeah. And you can't always leave a ton of money as a cushion. I could see why, because they don't want to deal with it and they figure if I left a lot of money in there, it covers whatever happened if I did make a mistake. But in a lot of states, I think probably all of them have a rule about how much. Some you can't have any extra money in there and some maybe a nominal amount, $250 or less, and you can't leave thousands of dollars in there as a cushion. And why would you want to? You've earned it. Why would you want to leave it there? But it's— they're— a lot of them are afraid of the trust account. They'll even go out of their way to figure out, how can I do this? Because if they do the work, it shouldn't really be a retainer moment, but you've got to follow the bar rules. Ultimately, that's the— that's your Bible, right? You've got to follow the bar rules. And if you don't, I mean, you'll be out of compliance. That's the main thing. And it also comes down to whatever money's left over.

Yeah, you brought that up, Linda, which Steve brought up, is talking about that, like you've mentioned, the key performance indicators. Well, there is a way, like within trust where a case might be, you may have, depending on the level of engagement, probably depending on all kinds of things, you, you may have earned dollars in there that actually really do need to be. So the routine of basically having this presented to you or being, having it viewed Does assist in the cash flow predictions and what needs to happen. So you both brought it up. I mean, and like you said, Linda, it's earned money. I mean, geez, why would you— it's not your savings account to leave it in.

No, some attorneys will come to you and they'll say to you, oh, I know it's not right and I know I'm owed money and that my money is sitting there, but I don't know how much to move over. Can you help me? Yeah, and that's where we come in. Yeah, exactly. So we have to come in and detangle, figure out what happened. A lot of that— let's see, Steve, actually you tell me, what are the things that happen? What's the common things that happen that throw the trust off balance?

Um, oh my gosh, there's so many.

Put him on the spot.

I know, but he's, he's Steve. It's his birthday. It's his birthday today. So happy birthday, Steve.

Intermission here. Happy birthday, my dear friend.

Oh, thank you.

So elated for you.

Happy you shared that with us.

So wire fees, right? Wire fees coming out of IOLTA or trust bank fees.

Wells Fargo is notorious for charging.

Sorry, we named a bank. Sorry.

That's okay.

I mean, I'll name that bank as long as I'm alive. I mean, that's what they do. They're a good bank. I like them for trust accounting.

I really do.

But they're notorious for charging the bank fees.

A check order.

A check order. Wrong amounts. We had one just this morning. I was working on a trust account. The check was for $732.03 and the bank cashed it for $3,203.

Yeah, we were talking about earlier, right? The transposing of number. I mean, people make mistakes. It's not a robot itself. There are validations behind this.

Or this happens so often with trust accounts, especially I see this with real estate attorneys where they will write a check And they'll forget to post it.

Yeah.

You know, and they're like, well, you know, I did what I needed to do. I thought it would catch up at the other end. It's like, no, no, we've got to post this because we're keeping track of your trust account. You know, a lot of them on a daily basis, we'll sweep through and look at them every day.

You know, how about when an attorney deposits the retainer into the operating—

into the operating account?

Yeah, that one happens a lot.

Or the system—

or the bank does it.

Well, because like Certain platforms that you use to collect money, if it's in a form of ACH or credit card, doesn't really help the person understand the discernment. So they just pay it in whatever they think it is when they realize there's 2 tabs on that screen. I don't want to say the name of this product, but event that this does happen very frequently, especially if it's a link on your website. I mean, it's just—

The merchant account. You're talking about the merchant account. They didn't map it to the right. They didn't map it to the right Bank account, or they didn't put—

pick the right tab, you know, because it does have 2 tabs. One is if you're paying an invoice, one is if you're retainer. Translation, retainer. Sometimes people just— they, they know what a retainer is, but you get lost when you're paying a bill, I guess, or when you're paying a bill and a retainer. I don't know.

And you know, the, the other thing too, one of the things that— one of the very basic things that I harp about in the classes I teach at the Bar Association, especially to new attorneys, make your trust checks purple, make your operating checks green. You know, make on your— they should—

So true.

They should— in Colorado, it's called the COLTAF account, the Colorado Legal Trust Account Fund. COLTAF.

Okay.

Clearly on the checks, big bold letters, it should say the Linda Artesani Law Firm LLC COLTAF account. And it's a purple check. Yeah.

I love that.

Separate drawer.

That's a great tip.

You know, those really basic things to keep yourself—

Well, even separate numbers. We go as far as asking for separate numbers. Yes, the check numbering.

Yeah.

So operating can always start with the 100s, 1,000s, the heck you want it to be, but you can never start that. So if you have a, you know, 3 or 4, go up higher because you're gonna meet it at some point. But if you have a series in that number, just continue in a different path. So yeah.

Now here's another thing too that is so key with our clients and the trust accounts, and that is to make it abundantly clear that we're on their side.

Yes.

When they make a mistake, don't hide it from us. Don't Don't delay getting the answer to us. We're going to go to bat for you.

Mm-hmm.

And, you know, I've had situations, we're in one right now with a firm who's really worried about an audit from the regulatory agency. And I said, well, if that happens, you can show them that you specifically hired our firm to clean up this trust account and that's in process. And we'll be glad to share whatever we need to, you know, should that happen. And so, you know, teaching them that you're on their side and they need to include you in every little thing. If they make a mistake, pick up the phone. and call us.

I have a question. The odds— having somebody in-house doing the work for some firm, that's what firms want sometimes, right? They, they like that. But who's checking that work if you don't know what you're looking for as a firm owner?

I mean, that's why I say they need to sign off on that spreadsheet, on the bank statement, and on the—

Well, it's best to hire an outside Firm to validate our, our positions as firm owners ourselves is we're not tangled up in egregious behaviors that are happening internally. We're not emotionally attached to certain things.

Exactly.

We're providing a service. The service is of value. The service means something to you. It means something to us. And we come at it as a professional to professional. If you have someone in-house that we could work with, Great. However, same kind of metric. You are the business owner. We will be working with you in tandem with so-and-so. Um, so to build better relationships, I think, right, with the practice.

How about this one? We had a firm who I just, I had to just continually remind this poor lady. She, she was billing out of, out of her accounting software. Okay. And I couldn't get her onto a billing platform. to save my life. So I'm, I'm like, okay, we'll do it out of, out of the software. She was notorious for when a client might dispute something on an invoice that she's already billed and we took the trust money for, she would go back and open that invoice up again and change it, which would throw off everything we did in trust. This happens, guys. It does.

It happens. Reality.

There are so many moving tentacles to trust transactions where I think it's really important to, to get this message out to every— everybody, not only are you reconciling and keeping them in line, but you're educating them continuously.

Mm-hmm.

And with that said, as law firm bookkeepers and accountants, we really should know the rules and regulations in every state that we have clients and have print it out, save it in a PDF, whatever works for you, and have it thumbnailed and ready to go so that you can quote it or that you can say, I don't have an answer, I'll get back to you within the hour. And really be on the ball with the trust accounting because a zillion different things can happen.

Yeah. And I would shift the conversation a little bit too, because it's how to balance. So, Sarah, you get a client, like you just said, 99% of them, they're not in balance. How do you figure out to get it in balance? How do you know where to start?

Linda, let's do 99.9% and count that little one as the one anomaly.

Because it was very true. I remember that day that it happened.

We were like, It's balanced.

I know.

Shocker. So going back to your question is, how do you view it? What's the high level?

How do you figure it out?

How do you figure it out? Obviously, like Steve says, you've got the source documents, the bank statements, right? And looking at that, grabbing the data in the— if they're in 2 softwares, let's say you're in a practice management software and a ledger, accounting ledger system, whether it be QuickBooks, Xero, or anything of the like, whatever the ledger system is, And you've got to pull the data. Now, sometimes what we see, and there's always this dispute of how to look at the data, some are sub-ledgered out, meaning every matter has its own little kind of register on a balance sheet. Others may be grouped into just one number. So first validating, do those, those numbers even remotely look good? Are they reconciled? And then what's inside that reconciliation? And then you dive a little deeper. So it feels very kind of forensic-like in some cases.

Yes.

Not that we wear those hats and have that certification, but it has that same process. I have seen dialogue in social media things where it's like, well, it's just a penny. Well, depending on the level of complexity of the trust, depending on what's allowed, depending on all of the different things, just a penny means a whole heck of a lot in our world. It's not just a penny. We've got to find the dang penny. So, but you start at this high-level view and then you work kind of gradually inward and you group it down and group it down. There are processes that Linda and I do. There are processes that we do together sometimes. You know, Steve has like, hey, I gotta walk this through. Just help me talk this through because it can get really heady and complex.

It can.

Sometimes you got to reach out to a fellow colleague.

It's like, you do want to make sure I don't have my blinders on.

And then you find patterns. So yeah, you and I have worked on some. We'll, you know, we'll pull up the balance sheet, we'll look to make sure the bank and the liability account, and maybe hopefully sub-ledgers are there, and we can figure it out from there. If not, we have to figure out what's the sub— you know, if it's customer-based, we have to sort it by customer to see each one that they have, and then we'll actually shoot it into the sub-liability so we have that visibility. But we pull that balance sheet up. If those 2 balances don't align, the bank and the liability account, now we got to go and pull the— we pull it up by the entirety of the file and then sub it down by year. So now we can target when did it last balance by year. Then we start to back it in by month. What month did it go wrong? And that's what you're trying to figure it out. And it's challenging sometimes. And it's funny, like you said, Sarah, because we have the Law Lab, we talk about this and we actually have I've actually destroyed our own file and had everybody come in and say, okay, let's figure out why is this wrong and where is it wrong? Because don't forget, now you've got that on the balance sheet and all that. Now you got to go back to that external software, that billing software, because that might have a whole different bunch of numbers in it. And now if that's not aligning, there's your third way, right? We got to figure out what's wrong in Clio, what's wrong in LeanLaw, what's wrong in MyCase or PracticePanther or whatever they're in. Because that number at the end of the day, if you run that report, might not align. And if it doesn't align, now you've got another issue you have to figure out, especially if it's not connected, which a lot of times it's not, and they've got it standalone, and that's another problem.

So we're currently working on a trust reconciliation that goes way back that involves 3 different billing platforms.

Oh, don't you love that, Steve?

And so what, what we have to do, what we're doing is That sounds crazy. You're taking a spreadsheet with a tab for each of their clients. Yep.

We've done that.

And in that tab it says Sarah in LeanLaw had this, in Clio she had that, in Tabs she had that.

Tabs she had that. And yeah.

And then we see that you took Sarah's $400 transaction and you lumped it with these 10 other clients, and 14 days later you did the transfer at the bank. And that's— and we have to map that out by client and then a general tab of all the general questions on it. And one of the rules that we work with is, you know, the clients are usually very antsy about getting it reconciled. And so they'll be like, well, you know, if you need to know what happened with Sarah's account, just call me and I'll fill you in. And it's like, we're going to wait till the end of the project because sometimes Sarah's transaction might take 7 or 8 months and it works itself out in the reconciliation.

It's cleared out. Yeah.

And you don't want to know.

Because you might have changeover in staff, you might have changeover in managing partner. Who discovered it has a different change order software.

They changed the bank?

Yeah. That project I just mentioned, we also just switched banks too.

Yeah.

Yeah, we did.

Add that to the list. We did that too. A serial software changer, right? A serial software changer because it's not working. Let's change the software. No, it doesn't fix it.

It doesn't. The best part is when you get the ones, Linda, like what we have is The intention was to go— it's 3 firms owned by one umbrella, right? The intention was that this matter was going to move to this firm, same ownership, but it got all tangled up. And so then it's like this, this separate bank, separate IOLTA, owes this IOLTA the money because this money came in here and not here, and And then they posted on the books that they intended. They intended. And it's like—

But that's not what really happened.

It is a deep, deep dive. And yeah, so why did we want to talk about this?

Keeping the client involved throughout it, though. When I said a minute ago to hold off on the individual transactions till the end, but also throughout the reconciliation, keeping them involved because they quite often think that we're just waving a wand. And you have to be honest with them and say, You know, it looks like we're another 2 or 3 months out if we keep going at the pace that we're—

Yeah, yeah, yeah.

You gotta kind of involve them because it can turn into an expense, a big expense for them.

Yeah.

And you, you know, we always say too, like when we were talking at the lab, we always talk about it when people say to us, how do I price? How do I price this? I don't know how to price this. I don't know what I'm going to face. And you really have to dig into the— first of all, you should get paid for your file review, number one. And second of all, when you do get into that point, take a look at what you think it might cost. Don't look at 5, 10 years of data you have to fix, look at it as 1 year and then put a number on that, like the biggest year where they were the busiest, and you can kind of figure it from there in pricing because it is, it is a lot of work.

And it's tricky. It's not perfect science. I mean, there's different ways. But can I ask, so, um, when you're doing this level of cleanup, and I'll just ask both of you, I think I know Linda's answer, but You start to— do you look at it through the lens of, okay, what was happening then, the patterns, what was happening now, same people in the same seats? If there is, do you start to advise on the process differently, like, so the outcome is different so that you're not facing the same challenges by the time you kind of back up into the current year? What's like— what do you two both feel like is the best? I mean, what is that?

You've established the patterns. Oh, for sure. You want, you want to because, I mean, Well, just for example, because we just came out of this one, the person's booking in transfers. You know, QuickBooks says it's a transfer from IOLTA to operating. Boom, transfer. Boom, transfer. Doesn't account in for all the other parts of the, the working parts of what would actually happen behind that transfer. So you want to stop, you want to cut off, want to stop the bleeding, you know, before you keep going, because you don't want to have to—

Yeah.

How long is it going to take you to catch up to July, for example? You don't want to be in September still dealing with this because you didn't tell that person this is not the right process.

That's a really good point. Yeah.

And you know, to what I was saying a while ago, SOP it. Start writing the SOPs for this firm, for their trust transactions, and start sharing it with them. As an example, I used that example of the firm that, with Sarah as the client, took her $400 and included it with a whole bunch of other people and transferred it 14 days later. Stop the bleeding with that and say, We need to do— because your trust account is so complex, we need to do individual transfers for each client until we can get this figured out, because it'll just continue bleeding if you don't.

Well, there's the other opportunity. I just— it came into my mind, and I feel like we don't talk about this enough in general, and maybe we should, is when firms are merging or a firm wants to merge with another firm, and one we've cleaned up and the other one we're realizing, hmm, We got some issues over here. What does it look like? How does that happen? That's another opportunity of not just work, but just advisement and guidance and structure.

And if a firm is closing and another one's taking over, you have to have that. We had it happen where one firm was purchased by the firm we were working with, and they have to send notes out. I mean, they don't— just because it got purchased doesn't mean that all that trust money goes right over to them automatically. They have to write letters and There was a compliance piece to that, and they had to know what was in that trust account. Because if you don't know what's in the trust account, how can you write to Sarah and say there's $400 in here and this firm's going to be closing and it's going to go into this firm? Are you okay with moving the money or do you want your money back? If you don't know what's in it, you can't really even do that part of it, which is, again, makes our job so valuable. It also keeps us ahead of technology because I'll tell you what, what did we just talk about is not an AI thing that's going to be bop in, not in Our lifetime, Steve. I mean, I don't think it's going to be able to come in and do that because it's so much of our brain specialized that— Yeah. And I can't tell you how many times Sarah and I have dug into one big— I was just gonna say big, you know, project. And we're sitting there sometimes going, we're trying to— we're trying to talk to each other, we're trying to figure out— we're doing it on a weekend because it's quiet, no one's interrupting. And then sometimes we just call uncle and say, let's just look at it with fresh eyes tomorrow. And then it comes to us when we look at it the next day. It's like we just couldn't see the forest through the trees.

What have you done in the situations? And you've, you've brought this up in the Law Lab before. What have you done in those situations where you finally have to go back to the client and say, how far back do you want us to go? Because we keep digging and digging and we're back to 2014 now and you're still out of balance. How, you know what, that's always puzzled me. So I'd really like to hear how you handle that and the advice that you would give them to keep them whole in an audit.

Mm-hmm. Um, it's, it's all about communication on the front end. And then, as you said, Steve, it's in that— as that you're doing communication all along. Just because you've gone dark and you're doing all this work, you're not not communicating. But at some point in the dialogue, it's like, okay, well, we've reached the end of this year and we're already seeing our findings are X, Y, and Z so far. Let's have a conversation. We need It isn't in our interest to want to keep going back, per se, unless there's something about this. Do you feel that you have— that we've given you enough facts that you can actually work it out? Because a lot of times you're the source of information as an individual. Fundamentally, you may know what the answer is as the firm attorney. You know, you might be a solo, might be a 2-partner, 3-partner. One or 2 of you may already know what the answer is, and we've hit a number that actually is like, oh, oh my God, that's what that is. Okay, okay. So be it. But there comes a point where you, you want to make sure you're that delicate line. So it's not like, oh my God, they're just going back and going back and they say this. No, you want to have those meetings and level of communication open. To— for assurance, transparency, and ultimately the guidance.

It—

at what point do you want us to put— some people have said, please go back to the beginning. Okay, that's 2016, that's 2015, that's 2014.

It's on a paper grid sheet.

Or, or it's in storage.

Or it's on a secret spreadsheet somewhere. Oh, I've got a spreadsheet from when I started. Do you think that might help? It's like always ask for the extra spreadsheet because it's there somewhere.

But I think, Steve, To your point, you have it. I'm fairly certain you probably have this in your base of communication, but at some point it's like, I'm not surrendering. I'm just asking for confirmation.

Exactly.

Where would you like this to travel? And I'm going to present to you where we are based on what we need.

Let's address all the pain here.

Yeah. And let's discuss what's best suited right now. I mean, they're attorneys, they're smart. This is what they do as individuals in a profession, analyze data, research data, understand the law. And the intent is never to make it so somebody's out of their own money.

Never, never.

From our experience. You're in business to serve, right? Like, as a professional. I mean, that's why sometimes what we heard with Theophan in our meeting was like, sometimes you're best not to do the consult as an attorney because you're giving away a lot of information that needs to be paid for. So that, you know, you're in that business to serve, but I, that's my take on it.

Well, and also you need to document every minute of every day that you're working on that trust project. To Linda's point, trying to come up with a price of what it's going to cost to do this cleanup on the trust account. And sometimes there's sticker shock because it can be several thousand dollars.

Yes, a lot of thousands of dollars.

Thousands and thousands of dollars.

And if you get to the point though, and that attorney's like, You're at 2015 and there's still a problem? Yes, there is. And if you've cleaned up a $5 million trust and you're down to $27.18, how much further are you going to go back? And if they say, I've had enough, we're not going any further back, get that in writing.

Yes.

Get that in writing from them for our purposes. If they don't want to keep going because the problem, you know, it's probably something insignificant at that point, but I mean, it's Ultimately on them when it comes to balancing trust. We'll go all the way back to the beginning, but, you know, you really—

Well, there is some areas though that we— yes, as we've learned that we have, we could get in trouble. So, yes, Steve's point, the, the documentation, the openness, the validation, the mutual sign-off. We're presenting you this. You've— we've understood it. We've had a meeting. We agree that this is okay. I mean, there— we have learned that. Yeah, there is that piece. And so, so again, it goes back to what is it worth? So is it worth having an external person coming in to validate these things for you that has this knowledge?

Because they should go all the way back to the penny.

Yeah, absolutely.

If it goes back to 2002.

Even in our own profession, we have— there are people that argue that, sadly, and that's fine. But that's not how—

You know, the thing sometimes is they can't get the— they can't get the bank statement because they closed that bank account. Please don't close a bank account unless you don't have all the documentation. As attorneys, please, if you're going to close the bank and move on to another bank, download every single bank statement. Because if you lose access to that—

Pay the fee to get the—

Pay the fee.

And have them do it.

Yes. Get— make sure you get them all because that's—

Electronic and paper is fine too. Like, yes, exactly. It's just the painful way of, well, I don't have access to it anymore. Well, that really stinks.

That's not going to work with the bar.

Sorry.

One of the tricks that I like when you're first working on the trust project reconciliation is to ask the client, go through this list of clients that we're providing you now. Out of your billing software and on the subaccounts and all that. And tell me if you're still working for them or when you closed your file out. That's huge. Because when they see— when they tell me, oh, I see Sarah Prevost has $400 in there, but we stopped working with her in 2015. Oh my gosh, there's, there's something glaring right there that you can go after.

That's an obligation. They have to give that money back.

Well, or did they not just transfer it?

Or did they not pay themselves?

I would just put extra dollars behind the 4 for me.

She wants more than $400, basically.

Okay, you have a $40,000 return.

Okay, okay, I'll take that. That's another piece of it though, Steve, right? Because balancing the trust also includes following up on those unclear checks, which is something that doesn't happen with a lot of general bookkeepers.

Yeah, yeah.

Or They just disregard the fact that there's a ton of payments sitting in undeposited funds not dealt with. Why are they there? Should they be there? Are they duplication? Those are the things that we need to make sure. And if there's a bunch of trust accounts that should be closed and zeroed out and just removed off the list, it— that should be done too. And this— so it's a lot of work involved. I hope any attorney that may be listening can understand now a little bit more about the, the heartache of this and how important it is to hire somebody who knows legal accounting, a bookkeeper that knows— and we've got a lot of them in our Law Lab— bookkeepers that know how to do this work, it's going to save you a lot of time. It's better than training somebody that's not done this work because there's a lot involved. A lot of the attorneys don't even understand what's involved that we do.

You said something critical. I'm just laughing because hiring somebody that knows this work, well, oftentimes it's the person inside the firm that knows the little least, but they happen to know how to print a check out of something. So they—

Yeah. And those are the ones that are helpful to you. They're helpful to us, but a lot of times they got served that job because they were the best paralegal, they were the best legal assistant. Hey, can you do this bookkeeping stuff? Simple. You really want that outside eyes, no matter what that person's doing that's in that seat. They're really the conduit for us because they're boots on the ground in the office. But we wanna have that person be our ally. And, and they are usually better served if they're a paralegal. You shouldn't be doing the bookkeeping. Let the company that knows what they're doing do the bookkeeping for you or the accounting work for you. I mean, that's critical. It's money well spent in the long run.

Do you feel like Bam Bam now? Bam, bam. Yeah, the visual.

Listen to us. This is a great topic. I think this was Steve's.

Well, you know, this is— I can tell we all get so passionate on this one. I love the energy of this podcast today. This is the basis of what we do.

It is potatoes, but I don't eat meat, so can it be vegetarian?

There you go.

Well, like I said, Sarah, potato, potato.

That's funny. I love it.

I didn't say that on here. I said it before, but yeah, potato, potato.

I know. Good times. Good times all around. Well, obviously we like—

We are passionate. And if you want to learn more about this, this is Law Lab Stuff 101. We talk about trust accounting all the time because we can help you even figure out the Clio side.

Well, you said just that one. We have more that we can figure out.

We talk about a lot of other topics, but this one in particular is one we discuss quite often.

So I want to reiterate what you talked about a while ago, Linda, is feel safe in calling another colleague.

Yes.

Call somebody else and say, hey, can you take a look at this for me? Because sometimes we can't see the forest for the trees.

Yeah. Sometimes we're looking at $0.60 and our eyes are seeing 6. And it's like, what? What's wrong here? And then it's just something as simple as our brain is thinking it's something else.

I love it. Linda does the usual. I just, I get quiet. I'm like, I know it's not going to work out this way, but she goes down her little rabbit hole of like, well, let's just take that number, divide it.

I'm like, oh, the 9 rule, Steve. Yeah. The T-account and the 9 rule, right? Yeah.

Yeah.

Does it divide equally?

You know what else, guys? Let's give them a little tip. Don't be afraid of using T-accounts. Draw out your T accounts.

It's like this, like that.

It's so true though, because it's so true because just sometimes it's called mind mapping, right? When you feel like I can't figure this out. And a lot of times for me and Sarah, it's just we're talking, trying to figure out what the heck happened here. And then it's like, oh, I found it. And then it just happens. And then there's patterns. And when you start to find out there's patterns. So you see, oh, this bookkeeper was working there from 2002 to 2008, and she did this piece wrong, and they never reimbursed the wire fees or whatever. And then you get to 2008, it's a different bookkeeper who started booking in trust transfers. Oh, there's this pattern. And once you figure out those patterns, it's really— I mean, we're all Inspector Clouseau basically at this point, right?

I'll be Inspector Gadget with all the arms.

You can be Inspector Gadget, Sarah.

I'm going to be the Pink Panther.

You're going to be the Pink Panther? You can be the Pink Panther, Steve. It's your birthday. You can be whatever you want.

I can be whatever I want today.

You can be whoever you want.

Well, great topic. And I'm going to let Steve take us out. And hopefully this is going to be a good one. It should be lively conversation. If anybody wants to add in comments on our YouTube page or whatever, we would love to hear it. If you have any questions about this stuff, go ahead.

Cheerleaders running across.

Yes. We'll have to have Tierra put like little inspectors with these spyglasses. Yeah, yeah, yeah.

And you know, in the pink feather, we'll come back to this subject as many times as we need to because it— and it's always changing.

Touché.

Every reconciliation is different. So if you'd like to subscribe to the podcast and our YouTube channel, we'd also love to have you if you'd rate this podcast and share it with your friends. If you have questions, topic requests, or guest suggestions, you can email us at info@accountantslawpod.com or send us a message through our website at accountantslawpod.com. If you want to join us at the Accountants Law Lab, which you just can't miss that, that's, that's the best thing you can do for your career. Visit the website at accountantslawlab.com to sign up. We'd love to love it if you'd follow us on Instagram as well.

And where are you? Where? Okay, but now we do Traveling with Steve. Where in the world is Steve going?

Well, right now I'm sitting in the Airstream in my carport, but right after this recording, We are hooking up and heading up to Salida, Colorado to the Vintage Airstream Rally.

Oh, that's gonna be fun. You'll have to post pictures on our, on our page. Sierra, give them to Sierra. She'll put them on.

I started out as a member of that club back in 2006, and I— the vintage Airstreams are in my heart. I'm, I'm going to be with my tribe for the next few days and I'll be working from the Airstream. So, you know.

I love it. And I called it accidentally an Airbus. So maybe you'll fly like a bus.

I can't afford the gas for that though.

I know, not at this rate, no. But we'll have fun. We're excited to see the photos and hear all about it. And yes, until next time, right?

Yeah. Thanks for joining everybody.

Thank you. Bye.

Bye.